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M&As expected to surge in 2014

Updated: 2013-12-24 10:24
By Mike Bastin ( China Daily)

M&As expected to surge in 2014

C. Larry Pope, president and chief executive officer of Smithfield Foods Inc, left, and Wan Long, chairman of Shuanghui International Holdings Ltd, shake hands before a news conference in Hong Kong on Oct 10. In May, China's biggest meat processor, Shuanghui, bid successfully for US pork-processing giant Smithfield. Shuanghui's takeover of Smithfield was valued at $7.1 billion. Jerome Favre / Bloomberg

Optimism based on Chinese firms' appetite for famous foreign brands

Despite predictions of an upturn by many, the global mergers and acquisitions market reached an eight-year low in 2013, even dipping below the doldrums levels of 13 years ago, falling by a further 6.2 percent from 2012.

The decline came in spite of a flurry of noteworthy deals, many of them cross-border M&As. The United States-based wireless carrier Verizon Communications Inc bought back Vodafone Group Plc's equity stake in the company for $130 billion, the third-largest corporate deal in history.

Also noteworthy were some of the M&A forays into foreign markets by China's ever-expanding, acquisitive companies. In August, Chinese conglomerate Dalian Wanda Group Corp Ltd paid 300 million pounds ($490 million) for a 92 percent stake in British luxury yacht-maker Sunseeker International, a brand that rivals the likes of Aston Martin for its James Bond film placement notoriety.

Just before Dalian Wanda's cross-border takeover announcement, in May, China's biggest meat processor, Shuanghui International Holdings Ltd, bid successfully for US pork processing giant Smithfield Foods Inc.

Shuanghui's takeover, valued at $7.1 billion, represents China's largest cross-border deal since China National Off-shore Oil Corp bought Canadian oil and gas producer Nexen Inc for $15.1 billion in 2012.

It would appear, however, that corporate leaders' reticence towards mega-merger deals in 2013 will not persist during 2014. An increase in global M&A activity of between 10 and 15 percent is widely predicted, with corporate leaders far more comfortable toward debt financing of takeover deals.

Much of this optimistic upturn for global M&A activity is based on the belief that cross-border deals will rise during 2014 and that much of this will be driven by Chinese companies' gobbling up famous foreign brands.

China Shouguan Mining Corp, a giant in China's rapidly expanding gold-mining industry, is definitely one to watch for further M&A deals in 2014. Demand for gold in China is soaring, and Shouguan's management has stated publicly that it will continue to expand aggressively via M&A deals in 2014.

China's gold-mining industry players were involved in a record $2.2 billion in takeovers during 2013. Expect Shouguan and some of China's other major mining corporations to look further afield and bid for foreign competitors during 2014.

Of course, growth in the technology sector will doubtless drive much of the anticipated 2014 M&A activity, and Lenovo Group Ltd, China's dominant personal computer player, is highly likely to seek to expand its global footprint during the coming year.

Lenovo has recently been linked with well-known technology companies BlackBerry Ltd and HTC Corp, both loss-making enterprises.

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