Posted on 06/22/2005 10:10:14 AM PDT by BringBackMyHUAC
China Cos. Show Appetite for Brand Names
By ELAINE KURTENBACH, AP Business Writer Wed Jun 22, 8:50 AM ET
China is moving into the merger-and-acquisition major leagues, as its star corporations shop for American household names like Unocal, Maytag and IBM, hoping that global ambitions will mean bigger profits.
State media reports quoted unnamed officials at China National Offshore Oil Corp., or CNOOC, as saying the company's board would meet this week and decide whether to go ahead with a $20 billion bid for Unocal Corp., the ninth-biggest U.S. oil and gas company.
The CNOOC purchase, if it went through, would be China's largest overseas acquisition ever.
Staff who answered phones in various departments at CNOOC headquarters in Beijing said they could not confirm a report by the Financial Times that the state-owned company plans a counteroffer against a $16.7 billion bid by Chevron Corp.
Meanwhile, Chinese appliance maker Haier Group would not immediately comment Wednesday on its plans after competitor Maytag Corp. said it was reviewing a $1.28 billion buyout offer from Haier and two U.S. private equity firms, Bain Capital and Blackstone Group.
Whether or not the two big deals succeed, they come on the heels of Chinese computer maker Lenovo Group Ltd.'s takeover of IBM's personal computer business and reflect China's growing appetite for Western corporate icons.
"I'd expect at least a half a dozen similar deals by the end of the year," said Jack J.T. Huang, chairman of international law firm Jones Day's Greater China practice.
Cash-rich companies like CNOOC, buoyed by fat profits from higher oil prices, are keen to secure oil and gas reserves to help fuel China's economic boom. El Segundo, California-based Unocal has international oil and gas operations, mainly in Asia.
The Chinese are newcomers to the international mergers and acquisitions scene, and initially most of their purchases were focused on energy and minerals. But consumer-product companies recently have joined the fray, hoping to tap into overseas distribution networks and claim well known brand names as their own.
Haier, which is based in the eastern Chinese city of Qingdao, was one of the first Chinese companies to expand internationally, setting up factories in Algeria, Mexico, Iran and Southeast Asia before it started up its first U.S. factory, in Camden, South Carolina, in 2000.
But the company's inexpensive refrigerators and washing machines have generally been sold only by discount chains like Wal-Mart. Taking over Maytag would net it a household brand name and a nationwide distribution network that could vastly expand its sales.
Maytag agreed a month ago to be acquired by Ripplewood Holdings, a New York investment firm. But in a statement late Monday, Maytag said it was considering a preliminary bid from Bain Capital, Blackstone Group and Haier America of $16 per share, $2 more per share than the offer from Ripplewood.
"We continue to support the Ripplewood transaction; however, we also believe that it is incumbent on us to pursue the possibility of achieving a higher price for our stockholders," Maytag's lead director, Howard Clark, said in the statement.
Haier's headquarters issued a statement last week saying the company was "closely watching the takeover situation for Maytag" but had not made any decision.
High-profile takeovers can run into myriad problems, as Lenovo found with its $1.75 billion purchase of IBM's PC business. In that case, the deal was only completed after a U.S. government panel concluded that the merger would not pose a national security threat.
Already, the possible takeover of Unocal by a Chinese state-controlled company has raised political hackles, with some members of the U.S. Congress reportedly lobbying President George W. Bush to review the deal if it occurs.
Haier's ambitions have raised questions back home over its ability to effectively manage a company like Maytag, which has been struggling against rising costs, slipping profitability, sliding stock value and intense competition from Asian manufacturers.
"Watch out Haier!" cautioned an editorial in the state-run newspaper China Business News.
Prize acquisitions can turn out to be liabilities, it noted, pointing to the case of TCL Communication Technology Holdings Ltd., whose joint venture with France's Alcatel SA foundered amid rising losses for the intensively competitive cell phone business.
"When these situations can indeed be turned around by reducing costs or otherwise adding value, it's a big win for Chinese companies," says Huang. "If not, it could be a nightmare."
ping
A friend of mine recently returned from Shanghai, and said it's like Blade Runner there, all fueled by the transfer of free world jobs. However, the pollution was worse than Mexico City (where she went last month), there were NO health regulations for restaurants, and a new, fifteen-story building collapsed while she was there. FYI.
Now where did I put that "Chinese For Dummies" book???
They may be swallowing more than they can chew.
Brainstorming thread on the topic of Red Chinese buy outs:
http://www.freerepublic.com/focus/f-news/1428168/posts
That may be true, but allowing the purchases of oil/gas corporations is a national security risk in the extreme. We WILL be at war with China in the next 20 years.
==They may be swallowing more than they can chew.
True. Unfotunately they may be swallowing more than WE can chew as well. I really don't understand the leaders of this country any more. It's like we are being led by a bunch of Neville Chamberlains. In short, we need new leadership in our nation's capital. It would be great if we could start by un-electing John McCain.
Remember the Yugo? it is a universally recognized name (bad!).
The ownership of a substantial portion of American oil and gas production by an agency of a foreign government is unacceptable, even were it a historically friendly nation like Britain. The fact that the ownership will be that of China makes the threat even worse. Congress should act to prohibit the deal, the sooner the better.
Blade Runner? She must have been on Nanjing Lu Road at night. Very beautiful. Was there in May, not any more polluted than our large cities (and much less so than say, L.A.). Now if you want pollution, go to Tianjin. Ewwww!
Shanghai is China's economic center (like NYC), compared to Beijing which is the cultural/governing center (D.C.). Shanghai has always been the most "Western" city in China, from exposure to the Western powers as the main trading port back in the early 20th Century. Wife & I enjoyed our trip to both cities, and the common folk were friendly and helpful. (Not to say their gov't won't do something stupid and we have to put them down)
Your comment about the Chinese people was the telling point. Everyone I've spoken to has mentioned how nice they are. Of course, most EVERYONE EVERYWHERE is nice if you approach them with respect.
Didn't the Japs try this once?
I don't see the problem. They are buying things that will become nearly worthless if there is any kind of war involving China. That would appear to give them lots of incentive to avoid any war.
==Didn't the Japs try this once?
Yep...however, at least they were our ally at the time (as opposed to Communist China, which still views the US as "the main enemy").
"The Golden Rule" is so amazingly simple, isn't it? Most major religions speak of it (with maybe one notable exception).
Someday in the future, an interplanetary craft will land in D.C., we'll make contact, and ask, "Oh wise travelers, please share with us your universal wisdom"
To which they'll reply, "Ummm... treat others the way you would like to be treated?" :^)
Umm...while I'm a firm believer in the Golden Rule (which originated as we know it with the ancient Greeks, by the way), I was speaking of the political Golden Rule: "He who has the gold, makes the rules." First spoken by Diamond Jim Brady, not quite so long ago.
Or, is this war already? War in the economic dimension ..
That's the key. The "firm" courting UNOCAL is not a firm, it is a government owned monopoly. Therein lies the fatal flaw (for Western countries) in the WTO. The WTO presumes that all commerce will be in the private sector and will only involve private sector players. What happens to the brilliant WTO model when there are government owned monopolies on the playing field?
The post-Mao Chinese Communists are far more astute than the Soviets were. Stalin and his successors were more interested in building a preeminent military force without the complete infrastructure necessary to sustain the cutting edge in technology. Despite the Soviet ability to borrow or steal Western technology and even get Westerners to build factories such as the Fiat auto works and the Kama River truck plant, the absence of rational calculation of costs and benefits in a command economy resulted in overall Communist failure to effectively compete with the United States even with military spending taking up far more of the GNP than in the Western democracies.
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