August 1, 2017 / 9:47 PM / 2 years ago

China's trophy case could become discount rack

The headquarters building of Anbang Insurance Group are pictured in Beijing, China, August 25, 2016. REUTERS/Jason Lee

HONG KONG (Reuters Breakingviews) - A quartet of embattled Chinese dealmakers may be forced to hold an overseas yard sale. Officials want Anbang Insurance to sell off its offshore empire, Bloomberg reported on Monday. Meanwhile, Reuters reports the property-to-cinema firm Dalian Wanda is blocked from refinancing offshore subsidiaries. In contrast, HNA Group says it remains keen on ousted White House adviser Anthony Scaramucci’s hedge fund-investment firm, SkyBridge. But pending deals are likely to come under pressure one way or another. Foreign bargain-hunters could benefit.

    Reuters reported in June that banking regulators were anxious about high-profile acquirers, including Anbang, Dalian Wanda, HNA and Fosun. That echoes a wider campaign to reduce corporate debt spearheaded by President Xi Jinping.

    Thomson Reuters data shows the four companies have bought more than $44 billion in overseas assets since 2012, through 221 deals. Targets included the cinema chain AMC Entertainment, the Waldorf Astoria hotel and Cirque de Soleil. Beijing worries that much of this was financed with debt from domestic banks. Officials appear particularly concerned about Anbang, which sold a lot of risky-looking products blending insurance and investment. The firm, whose chairman has also been detained, says it has no current plans to sell assets, nor has it received orders to this effect.

Graphic: Four Chinese companies are under official pressure after a foreign M&A spree: reut.rs/2f3oKc2

    Despite these denials, there is now a cloud over $12 billion worth of pending transactions by Anbang and its three counterparts. Purchases that the government considers ill-advised may also be unwound. That may include the SkyBridge deal, which has just lost whatever political side-benefits it may once have offered.

    It is unclear how aggressive Beijing plans to be. Making Anbang unwind its overseas portfolio in a hurry would necessitate a massive fire sale. Wanda’s offshore properties that rely on cheap Chinese refinancing might also be put on the block.

    But so far the campaign seems selective. Even as Anbang and Wanda squirm, HNA is still trying to close deals, including for Rio de Janeiro’s airport. Fosun is also still active, announcing plans to buy a French margarine-maker.

    Even so, holding on to trophies that leave executives vulnerable to political attack will make them uncomfortable. Their doors will be open to reasonable offers.

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