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Location: Home > Data > December 2014 Saw M&As Surging up; Another M&A and Reorganization Tide Is Around the Corner

December 2014 Saw M&As Surging up; Another M&A and Reorganization Tide Is Around the Corner

By Li Qun , Zero2IPO Research Center
Updated: 2015-01-07 16:15:36
According to the statistics of PEdata under the flag of Zero2IPO Group, in December 2014, a total of 297 M&As were completed on China’s M&A market, of which 287 have disclosed their trading value, i.e. about US$10.01B in total or US$34.87M on average. Compared with the previous month, in December 2014, the number of M&As on China’s M&A market rose by 109.2% month-on-month and 42.8% year-on-year and the aggregate trading value involved rose by 79.8% month-on-month but dropped by 38.1% year-on-year. The statistics of PEdata shows, within nearly a year, the number of M&As have been on the rise, and the trading value involved has been in a periodic fluctuation. At current, the M&A market remains in a stage of callback. In 2015, the M&A market is accumulating strength for a take-off, there will be more and more M&As on domestic capital market, and possibly nationwide M&As in the future. 

Specifically speaking, 297 M&As were completed on China’s M&A market in December 2014, including 276 domestic M&As, 92.9% of the total, among which 267 deals have disclosed their trading value equivalent to US$8.92B, accounting for 89.1%; there were 18 outbound M&As, accounting for 6.1%, among which 17 deals disclosed the trading value equivalent to US$995.75M, 9.9%; there were three inbound M&As, accounting for 1.0%, the trading value involved was disclosed to be US$90.91M, accounting for 0.9%. Geo-Jade Petroleum Corporation acquired 95.0% equities of Maten Petroleum Joint Stock Company with a transaction amount of US$526.00M, 5.26% of the total amount disclosed in December 2014, undoubtedly becoming a big M&A deal of the month. Geo-Jade Petroleum, a listed company engaged in commercial property operation, currently specializes in real estate development, property leasing and trade. Maten Petroleum’s main assets are located in three oil field blocks in production in Pre-Caspian Basin of the Republic of Kazakhstan, respectively Matin, Eastern Kokarna and Kara-Arna oil fields. Pre-Caspian Basin where Maten Petroleum’s three blocks are located is one of the internationally accepted areas with concentrated oil and gas resources and relatively low exploration and development degree, and there are numerous high-quality blocks remaining to be explored and developed. After the completion of asset acquisition, Geo-Jade Petroleum will enter the high-profitable petroleum exploration and development industry, the competitive capacity of Hainan Zhenghe Industrial Group Co., Ltd. will be improved, meanwhile its main business income and net profit will also increase.  

Machinery manufacturing industry has been taking the lead in terms of M&A and restructuring in China, while real estate industry saw the majority of M&As in China in December 2014 and energy & mining, clean-tech and bio/healthcare industries reported a number of M&As in 2014, and Internet industry has been a M&A and restructuring hotpot in China. In 2015, chemical raw materials and processing will be a dark horse in terms of M&A and restructuring in China. Beijing, Shanghai, Guangzhou, Jiangsu and Zhejiang will see more M&As and restructuring than the other places, as shown in Figure 2 and Figure 3.  

In terms of industry breakdown, the M&As completed in December 2014 were mainly distributed in 21 Grade 1 industries, including real estate, machinery manufacturing, bio/healthcare, Internet, IT, construction/engineering, finance, chemical raw materials and processing, clean-tech, electronic & opto-electronics equipment, chain retail, entertainment & media, etc. From the number of M&As, real estate industry ranked the first with a total of 32 deals completed, accounting for 10.8% of the total. Along with the changes of the structure of China’s GDP, real estate industry has entered a new situation, of which the increase of M&As is an obvious feature. According to Topina Capital’s Three Bottoms Theory, currently real estate industry remains in a stage staggered with policy bottom, market bottom and enterprise bottom, which was also a golden era for real estate M&As, but when real estate enterprises touch the bottom, the overall real estate industry will turn from the weak to strong; machinery manufacturing industry ranked the second with a total of 30 M&As completed, accounting for 10.1% of the total; and energy & mineral industry ranked the third with a total of 26 M&As completed, 8.8%.  

From the perspective of disclosed M&A value, real estate industry ranked atop with 31 deals and a total trading value of US$2.15B, accounting for 21.5% of the aggregate M&A value disclosed. It is worth mentioning that Longfor Real Estate acquired 8.7% equities of Chongqing Longhu Enterprise Development Co., Ltd. with a transaction amount of HK$3.19B (about US$411.00M). Longfor, established in 1993, is a professional real estate company focusing on product and service quality, with its business incorporating real estate development, business operation and property services and covering 23 cities in West China, Circum-Bohai-Sea Region, Yangtze River Delta, South China and Central China, accumulatively over 100 projects have been developed, and the operation scale and comprehensive strength of the company have stood out in China’s real estate industry. Being an affiliated company of Longfor, Longhu Enterprise mainly engages in real estate development through managing and controlling its subordinate enterprises. Projects it invested and completed include Longhu Nanyuan, Longhu Xiyuan, Longhu Cinnamon Villa, Longhu North City Heavenly Street, Longhu Sweetgum Yard, Longhu North Shore Constellation, Longhu Crystal Town and so on. Through the acquisition, Longhu Enterprise will become a wholly-owned subsidiary of Longfor, thus maximizing its interest contribution to Longfor. Energy& mineral industry ranked the second with 25 M&As completed and US$1.03B worth trading value involved, accounting for 10.3% of the aggregate M&A value. Grand Blue Environment Co, Ltd. acquired 30.0% equities of Foshan Nanhai Gas Development Co., Ltd. at the price of RMB384.00M (about US$62.70M). Grand Blue is a listed company focusing on environmental service industry, with the businesses, such as tap water supply, sewage treatment, solid waste treatment and gas supply, and committed to providing various cities with systematic environmental services and solutions. Nanhai Gas is a Sino-foreign cooperative enterprise established by Foshan Nanhai Gas Corporation and Good Trade Limited, with the businesses, such as pipeline gas, pipeline liquefied petroleum gas, cylinder group station supply, liquefied petroleum gas wholesale and bottled gas supply, etc. Through the acquisition, Grand Blue may further enrich its industrial structure, support the business expansion of the company via utilizing the sound profitability and cash flow of gas, and strengthen its sustainable development ability. Construction/engineering industry ranked the third with 19 M&As disclosing the M&A value of US$957.00M, accounting for 9.6% of the total. For example, Wumart Stores, Inc. acquired 70.0% equities of B&Q (China) Real Estate Development Co., Ltd. with a transaction amount of RMB1.40B (about US$229.00M), being the largest transaction in the industry in December 20014; Wumart Group operates 750 chain supermarkets in North, East and Northwest China, being a controlling shareholder of two listed companies--Wumart Stores, Inc. and Yinchuan Xinhua Department Store Commercial Group Co., Ltd. The group owns various brands including Wumart, Merry Mart, Xinhua Department Store, Zhejiang Supply and Marketing, Huzhou Laodafang and Jingbei World, etc. Entering China in 1999, B&Q has an annual sales of RMB4.00B at present and owns 39 home furnishing stores in some first- and second-tier cities in China, and with the rise of domestic home furnishing brands, B&Q China suffers losses with each passing year. Wumart has a single business model, and for many years, Wumart Group has been seeking expansion. Through the acquisition, Wumart has entered a field which it is unfamiliar, but it is uncertain whether Wumart can vitalize the loss-making enterprise.
As for the average M&A value, logistics industry ranked atop with US$72.05M. Real estate industry ranked the second with an average trading value of US$69.44M. Telecom & value-added services industry ranked the third with US$59.09M.  
According to the statistics of PEdata, a total of 21 cross-border M&As were completed in December 2014, 20 of which have disclosed their trading amount; among which, 17 were outbound M&As with a trading amount of US$996.00M disclosed; three were inbound M&As with a trading amount of US$90.91M. Geo-Jade acquired 95.0% equities of Maten Petroleum at the price of US$526.00M. Through the acquisition, Geo-Jade is able to enter energy industry, join international energy market and participate in the competition, promote the internationalization process of Hainan Zhenghe Industrial Group Co., Ltd., realize the breakthrough in business scope, explore new profit growth point, and promote its brand image. While raising challenges to the operation and management of Hainan Zhenghe Industrial Group Co., Ltd., the cross-border acquisition of an energy company will also constantly improve the internationalized operation and management ability of Zhenghe. 

In December 2014, a total of 131 VC/PE-backed M&As were conducted, involving various industries such as IT, telecom & value-added services, electronic & opto-electronics equipment, real estate, Internet, chemical raw materials & processing, machinery manufacturing and so on. In December 2014, there were a total of 13 M&A exits. On December 16, Shandong Lipeng Co., Ltd. acquired 100.0% equities of Chongqing HuaYu Landscape Architecture Co., Ltd. at the price of RMB999.00M (about US$163.00M), and taking this opportunity, Fosun Capital and its subordinate Shanghai Fosun Chuanghong Equity Investment Fund Partnership (limited partnership) successfully exited. Lipeng is a sole professional manufacturer in China specializing at the production and sale of aluminum plate, printing aluminum plate, various anti-fake aluminum cap, combined types of cap, and producing full or semi-automatic production line, CNC presses, carving by computer designing, engineering construction, cold-punching mould, injected mould and packaged diversified relevant services for various kinds of caps. HuaYu is a comprehensive and large-scale landscape enterprise incorporating the businesses of landscape planning and design, engineering construction, pseudo-classic architecture, virescence maintenance as well as production and marketing of flowers and plants. Through the acquisition, besides compound anti-fake aluminum plate printing and anti-fake cap production, Lipeng will expand engineering construction, landscape planning and design, virescence maintenance, production and marketing of seedlings and other businesses, so as to adjust its industrial structure and realize diversified development strategies. 

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