HONG KONG (Reuters) - Fresh signs of a mooted wave of Chinese money looking to buy European assets on the cheap emerged on Friday, with a major bank said to be in the running for parts of Britain’s RBS (RBS.L) and an Italian yacht maker seen in the sights of Shangdong Heavy Industry.
Sources with knowledge of the matter said Bank of China (601988.SS) was among the lenders eyeing parts of Royal Bank of Scotland (RBS), as the process began to trim the investment banking arm of the government-owned UK bank.
And Chinese machinery maker Shandong Heavy is set to buy a controlling stake in debt-laden Italian yachtmaker Ferretti in a deal worth about $500 million, sources close to the deal said.
Such deals would follow last month’s $3.5 billion acquisition by China Three Gorges Corp of the Portuguese government’s stake in utility EDP (EDP.LS), as Chinese corporates look to take advantage of Europe’s financial woes.
No-one expects Chinese companies to splash out indiscriminately on European assets, yet many of their executives seem determined to diversify abroad and corporate bankers involved in M&A deals are already listing Chinese names as potential cash-rich investors.
Chinese companies can face regulatory obstacles to making acquisitions at home and abroad, while many lack the sort of international managerial experience needed to make takeovers a success.
Yet the number of deals in Europe seems likely to grow as China’s biggest export market grapples with a sovereign debt crisis, slowing economic growth, depressed stock market valuations and a dearth of deal-making capacity among would-be buyers closer to home.
The Chinese government has said it wants companies to acquire top brands as a short cut to global success, a trend evidenced when automaker Geely bought Ford Motor Co’s (F.N) Volvo car unit in 2010 -- and traceable back to 2004 when Lenovo Group Ltd (0992.HK) bought the personal computer business of IBM (IBM.N).
However there have been setbacks, most recently when Chinese interests failed to buy Swedish carmaker Saab SWAN.AS.
At RBS, the bank is seeking buyers for its cash equities, equity capital markets and mergers and acquisition business globally, one source said, though the process was said to be in its very early stages.
Like other Chinese lenders, Bank of China, once partly owned by RBS, has been looking to expand its earning capabilities through fee and commission income. The bank has a Hong Kong-based investment arm, BOC International.
RBS Chief Executive Stephen Hester is halfway through a five-year turnaround plan, which has so far included the sale of certain retail operations. In 2009, RBS sold parts of its Asian retail and commercial banking business to Australia and New Zealand Banking Group Ltd (ANZ.AX).
Ferretti, which owns the Pershing, Riva and Ferretti brands, has already agreed a joint venture with Shandong Heavy with the aim of developing a partnership to design and sell motor yachts in greater China and other emerging markets.
The acquisition of the Italian group by its Chinese partner is expected to be signed on Tuesday in Jinan, capital of China’s eastern Shandong province, sources said, with one adding: “The size of the deal is close to $500 million.”
The sources declined to disclose exact terms of the deal.
Additional reporting by Kelvin Soh, Taiga Uranaka and Victoria Bi; Writing by David Holmes in London