Reuters Insider - Breakingviews: Mystery Chinese bidders

Dah Sing Financial Holdings

15/04/2016 17:50

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 Source:             Thomson Reuters                                   
                                                                       
 Description:        April 15 - The surge in Chinese outbound M&A has  
                     Wall Street scrambling to find out who on the     
                     mainland may be willing to pay top dollar for any 
                     asset that moves, Editor Rob Cox tells Jeff       
                     Goldfarb.                                         
 
 
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Transcript (May be auto-generated)

                 There's one big question that M&A bankers all across the United States and 
Europe are asking themselves: "Who the hell is this Chinese company trying to 
buy my client?" Rob Cox has the answer. Who is this Chinese company trying to 
buy clients? Well, it's even more than that. It's like the bankers- anyone who's
selling an asset, anywhere in the United States, Europe- anywhere basically, 
outside of China, is now basically got to ask themselves: "Wait a minute, is 
there a Chinese buyer for this asset," because they're coming out of the 
woodwork. Right. Some of them no one's ever heard of, not even- not just 
Americans- Somebody in their websites or- People like in Hong Kong- where I was 
last week. This is where this came up. People are saying like there's thing 
called Dah Sing Financial- it's a bank in Hong Kong. It's selling its insurance 
business. They got two dozen bids- 15 or 

so of them are from Mainland customers, or potential buyers. Right. And like a 
few of them people had heard of. So it gives you an idea. So we've seen this- 
But in China they don't know who these mystery- Well, maybe- presumably someone 
in Beijing has a red phone that's connected to the- So let's got through a few 
examples. You've got one with Nelson Peltz who just sold the stake in- So 
yesterday, Nelson Peltz comes out- Trian group, his hedge fund, sells its 9.9% 
stake in Legg Mason to Shanda Group. And you say, well, what's Shanda Group? 
Sounds like Wanda Group- I don't know but- Well, yeah, yeah. It's another fish 
called Shanda- but it happens to be a 

company that's an investment company that it was formed from a company that used
to do games. Shanda Gaming- Okay. They do electronic gaming- anyway, they've got
lots of money to spend. So naturally, they buy 9.9% of a 115-year-old brokerage 
company in the United States. I know, hard to understand, but Nelson is happy. 
He sells for $32, which was above the market, which doesn't usually happen when 
you sell block trades- a minority block trade in any event. So it gets to the 
point where if you're selling any asset in the world, think- wait a minute, 
there's got to be so much- 

Well, this is also threw into chaos the auction of Starwood- Sure. -the hotel 
group, which had a nice bid from Marriott. Along came this company Anbang 
Insurance- Anbang Insurance. -which is a name familiar to people but then 
because of this bid people try to say: "What is this company?" They've been 
around. They bought the Waldorf. Waldorf, yeah. They've been around, but that 
was a great example. And it raises the question or the concern that you have if 
you're doing a deal, if you're a banker or a lawyer, an accountant: who are you 
selling to? Who are these guys? Like, you're 

supposed to know your customer. It's pretty hard to know your customer in any 
event when they're far-flung around the world. This by the way does help the big
banks- the sort of global firms or global- Yeah, easier to find these guys. Find
out who they are- But- I mean, in the case of Legg Mason- sort of had to go out 
and do a whole bunch of due diligence to find out: "Wait a minute. Who are these
new guys?" While we may not like having Nelson Peltz telling us what to do, 
firing our CEO, telling us to cut cost, at least he's a devil you know. Who are 
these Shanda guys? They did a bunch of- so Legg Mason themselves would've done a
bunch of due diligence on this. So more due diligence from the seller side than 
from buyer side- 

From all around because- remember, there's already about $93 billion of outbound
M&A coming from China, whatever, four months into the year. That was $103 
billion last year, so we're far- we're going to far surpass that, even with 
withdrawn deals like Anbang kind of out there. But this is like a whole new- the
whole idea is like the new language of Wall Street is going to be Mandarin not 
money in 2016, 2017- Alright, sounds like we'll be asking that question a lot 
this year. We'll be back with more Breakingviews next week