Is the Chinese Dragon looking to pastures further afield?

Earlier this week it was reported that China’s Bright Foods is close to launching an official offer of $2.5 - $3 billion for US-based GNC Holdings. At the same time China’s Tianjin Xinmao is somewhere in the middle of a yet-to-be formally announced battle for Dutch cable maker Draka. Realistically do these two deals represent signs that the Chinese Dragon is stirring and looking outside of its own country for opportunities?

Logically when analysing the economic facts about China, facts which include over 9 million companies operating in China, a population of over 1.4 billion consumers needing goods and services and growth rates averaging around 10% per year, one would say yes.

But looking at deal flow involving Chinese companies over the last five years, the hard evidence based on completed deals tells us that China is still looking domestically for its target companies.

Between Jan 1st 2006 and now Chinese acquriors have accounted for over $845 billion dollars-worth of deals, with levels peaking in 2009 at over $195bn. And if some of the deals that Chinese acquirors are currently linked to actually formalise then there is a good chance that 2010 will be the highest year by value so far for Chinese acquirors.

However, if we analyse where these Chinese acquirors have been buying, the figures show that Chinese targets are still their primary focus. In percentage terms by deal value Chinese targets have moved from accounting for 78% of all deals in 2008 to around 70% as of now in 2010. The figures are even higher if we look by numbers of deals.

So whilst there are currently some high profile examples of China looking outside of its own borders, this looks more like a starting breath of dragon fire than a full-scale assault.
 

Filed under: dealmaking, M&A, China