Tuesday, August 02, 2005
LexisNexis(TM) Academic - Document
LexisNexis(TM) Academic - DocumentCopyright 2005 The Financial Times Limited
Financial Times (London, England)
August 3, 2005 Wednesday
London Edition 1
SECTION: CNOOC WITHDRAWAL; Pg. 22
LENGTH: 496 words
HEADLINE: CNOOC retreat makes a martyr of chairman LABEL RISK:
BYLINE: By FRANCESCO GUERRERA
BODY:
When he launched CNOOC's bid for Unocal, Fu Chengyu, the Chinese company's chairman and chief executive, said the outcome of the offer would make him "a hero or a martyr".
After yesterday's withdrawal of the offer, Mr Fu can safely rule out the former, although the barrage of US opposition that greeted CNOOC's bid could still enable him to portray himself as the latter.
Personal reputations aside, CNOOC's defeat in the battle for Unocal is likely to deepen investor concerns about Chinese companies' ability to buy abroad.
Over the past few months, Minmetals, a Chinese state-owned group, failed in a Dollars 5bn bid for the Canadian group Noranda, while Haier, a white goods manufacturer, was outbid in the race for Maytag, the US maker of Hoover vacuum cleaners.
Similarly, Chinese telecommunications companies lost out in auctions for assets around Asia, leaving Lenovo's Dollars 1.75bn purchase of IBM's personal computer business last December as the only notable success story.
"Unless Chinese companies start clinching some of these deals, investors and target companies will apply a 'Chinese discount' reflecting their inability to close," says a Beijing-based M&A expert.
Spurred by the government's "go out" policy to acquire foreign assets, and the country's need for natural resources and consumer brands, cross-border M&As by Chinese companies are unlikely to dry up.
However, recent failures highlight the risks associated with the inexperience of management teams venturing for the first time on the global M&A stage.
Bankers complain that the bosses of state-owned companies - the best-funded and most likely to do deals - are hand-picked from the Communist party's ranks and not versed in the capitalist arts.
One of the rumoured reasons why Minmetals lost out on Noranda was that on the bid deadline day, the Chinese company's chief executive could not be reached because he was on an official visit to South America with leading politicians.
Such problems should not hinder companies like Haier and Lenovo, which are run by independent management despite remaining nominally under state control.
Both groups were praised by western bankers for choosing to share the financial and operational burdens of their bids with private equity groups - something CNOOC decided against.
Yet even foreign allies cannot force Chinese companies to keep within the rigorous timetable, and play by the tough rules, of contested takeover battles. One of the crucial differences between the cases of Haier and Lenovo was that the former was fighting two US rivals, while the latter privately negotiated its deal.
Admittedly, CNOOC faced an even tougher task, having launched the world's third largest cash offer for a company with a similar market capitalisation and having to compete with a rival more than 20 times its size.
But if China wants to build global champions and keep up its economic growth, it must make sure few of its chief executives follow Mr Fu on the road to martyrdom.
LOAD-DATE: August 2, 2005
Financial Times (London, England)
August 3, 2005 Wednesday
London Edition 1
SECTION: CNOOC WITHDRAWAL; Pg. 22
LENGTH: 496 words
HEADLINE: CNOOC retreat makes a martyr of chairman LABEL RISK:
BYLINE: By FRANCESCO GUERRERA
BODY:
When he launched CNOOC's bid for Unocal, Fu Chengyu, the Chinese company's chairman and chief executive, said the outcome of the offer would make him "a hero or a martyr".
After yesterday's withdrawal of the offer, Mr Fu can safely rule out the former, although the barrage of US opposition that greeted CNOOC's bid could still enable him to portray himself as the latter.
Personal reputations aside, CNOOC's defeat in the battle for Unocal is likely to deepen investor concerns about Chinese companies' ability to buy abroad.
Over the past few months, Minmetals, a Chinese state-owned group, failed in a Dollars 5bn bid for the Canadian group Noranda, while Haier, a white goods manufacturer, was outbid in the race for Maytag, the US maker of Hoover vacuum cleaners.
Similarly, Chinese telecommunications companies lost out in auctions for assets around Asia, leaving Lenovo's Dollars 1.75bn purchase of IBM's personal computer business last December as the only notable success story.
"Unless Chinese companies start clinching some of these deals, investors and target companies will apply a 'Chinese discount' reflecting their inability to close," says a Beijing-based M&A expert.
Spurred by the government's "go out" policy to acquire foreign assets, and the country's need for natural resources and consumer brands, cross-border M&As by Chinese companies are unlikely to dry up.
However, recent failures highlight the risks associated with the inexperience of management teams venturing for the first time on the global M&A stage.
Bankers complain that the bosses of state-owned companies - the best-funded and most likely to do deals - are hand-picked from the Communist party's ranks and not versed in the capitalist arts.
One of the rumoured reasons why Minmetals lost out on Noranda was that on the bid deadline day, the Chinese company's chief executive could not be reached because he was on an official visit to South America with leading politicians.
Such problems should not hinder companies like Haier and Lenovo, which are run by independent management despite remaining nominally under state control.
Both groups were praised by western bankers for choosing to share the financial and operational burdens of their bids with private equity groups - something CNOOC decided against.
Yet even foreign allies cannot force Chinese companies to keep within the rigorous timetable, and play by the tough rules, of contested takeover battles. One of the crucial differences between the cases of Haier and Lenovo was that the former was fighting two US rivals, while the latter privately negotiated its deal.
Admittedly, CNOOC faced an even tougher task, having launched the world's third largest cash offer for a company with a similar market capitalisation and having to compete with a rival more than 20 times its size.
But if China wants to build global champions and keep up its economic growth, it must make sure few of its chief executives follow Mr Fu on the road to martyrdom.
LOAD-DATE: August 2, 2005
# posted by Eastlaw @ 9:36 PM 
