FinanceAsia Magazine

Issue: May 2016

 

Anbang’s failed $14.2 billion bid for Starwood Hotels isn’t just a setback for the ambitious insurance company – it may well have knocked the credibility of all aspiring Chinese overseas buyers. 

The company’s behaviour during its unsolicited pursuit of Starwood underscored impressions that Chinese bidders can be difficult to read and unpredictable. Anbang also played fast-and-loose with people’s expectations for funding documentation.

Management boards at M&A targets have to spend more time and money evaluating bids from privately owned, youthful companies such as Anbang, which was only founded in 2014. To do so, they have to be certain it’s worth the time and effort. 

Anbang didn’t do itself any favours in this regard. The insurer waded into ongoing merger discussions between Starwood and Marriott with a higher offer, only to abruptly drop its bid with little explanation besides: “various market considerations”.  

Anbang’s behaviour even during its unsolicited offer had been, to put it kindly, cavalier. The company offered Starwood a written guarantee that it would pay for the company even if the Chinese insurance regulator blocked the deal, a person familiar with the discussions said. 

Anbang also offered little detail on its proposed funding package, merely supplying a skimpy outline about which bank would put up the money for its first offer, the person said. This seemed a foolish tactic, given mounting concerns about the levels of leverage some Chinese companies are piling on in order to fund big overseas acquisitions.

Anbang chairman Wu Xiaohui then raised eyebrows with his domineering approach to the M&A discussions with Starwood. While he spoke at length, his coterie of expensively assembled advisers and consortium partners were almost entirely mute, according to the person familiar with the talks. If corporate leaders do not take advice they run the risk of appearing less predictable as counterparties in merger talks.  

To be sure, Anbang’s aggressive bid for Starwood may be an extreme case. But it comes as the stakes rise for Chinese companies, their targets and advisers. 

China’s companies were the biggest acquirers and racked up the biggest overseas shopping bill of $92.2 billion on record in the first three months of 2016. 

For Chinese companies seeking to play a bigger role on the world M&A stage, generous offers are just the starting point. Ultimately, the ability to close an offer is key. 

Anbang’s failure to do so with such a high profile bid is likely to have ramifications for its fellow Chinese would-be acquirers.

 

About FinanceAsia Magazine

Established in 1996, FinanceAsia is the leading publisher of financial news in the Asia-Pacific region. Our combination of print and online products provide the latest news, analysis and insight into Asia’s financial markets.

Published monthly from our office in Hong Kong, FinanceAsia magazine provides our readers with the latest financial trends, interviews, features and investigative reports. The publication has a readership of key decision-makers at corporations, governments, investment and commercial banks, institutional investors, asset managers, brokers, traders and financial intermediaries.

Our regular sections include:

Data Story
We look at the key data behind a topical theme in Asian finance, showcased with an array of graphs and tables.

Greenshoe
A monthly opinion column from the FinanceAsia editorial team. We provide our thoughts on a topic making the headlines.

Deal of the Month
Our regular two-page spread with its signature artwork and in-depth analysis examines the equity, debt or M&A deal that we feel has had the biggest impact on the Asian capital markets that month.

Investor Dialogue
For company CEOs and CFOs, what investors think is a critical concern, and in this column we help them understand just this. Each month we speak to a Chief Investment Officer of a top fund and outline their views on corporate governance, what stocks they like and where they expect to generate the best returns.

Soapbox
A monthly opinion piece from a respected author or commentator on Asian business, finance or economics.

People on the Move
Here we summarise the key hires, fires and moves at the region’s banks, highlighting at least one major move each month.

Deal Tracker
We examine the major primary markets deals of the month and comment on the quality of the debt or equity transaction and the secondary market performance.

The Arts of Finance
A light-hearted look at investment opportunities surrounding the arts business in Asia.

 

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