Despite the media’s best attempts to whip us up into a frenzy of fear and loathing, the first serious wave of Chinese outbound investment that occurred felt rather distant to most people in the West. While some people were vaguely aware that the ThinkPad laptop had lost its IBM branding and had morphed into something called a Lenovo, most people were relatively unconcerned that the hungry Dragon was acquiring a serious number of mines and oil fields. After all, unless you were working for a company directly impacted, the bearing of these deals on peoples' daily lives was negligible. The most recent wave of M&A, sparked off by the financial crisis, feels distinctly different. As asset prices across all industries remain depressed, savvy Chinese acquirers are picking up distressed companies that have much less choice in who they sell themselves to or partner with. For many, it’s work with the Chinese or fold altogether.
One senses that the mood is starting to become a bit tense. While local and national governments polish off their shiny new Mandarin investment brochures, looking to the East for investments into greenfield and brownfield sites as well as help with new infrastructure projects, some of their citizens feel decidedly less comfortable about the Chinese buying spree, especially when it comes to treasured national brands. While Volvo slipped into bed relatively quietly with Geely, and the Swedes didn’t seem too overtly bothered by the deal, rumblings are afoot elsewhere.
China Brain suspects that the straw (or wheat in this case) that breaks the camel’s back has just been announced. That is, of course the fact that Bright Foods, a behemoth Chinese food company, has set the British breakfast table in its sights – in the form of the brand Weetabix. Apparently one billion pounds is the offer. Dating back to 1932, Weetabix was family owned for 72 years before eventually being snapped up by a private equity firm. Now, one wonders if the fact that this private equity firm is Texan was widely reported in the British press at the time. Or is the fact that a Chinese company is buying a beloved British brand far more newsworthy?
Whatever the case, this is another example of ordinary people really feeling the impact of Chinese companies’ increasing adventurousness on the global stage, as their balance sheets remain strong and loans are relatively easy to come by. But one can see that some of the new deals are ones that the man on the street might object to a little bit more than previous ones that had no noticeable impact on their daily lives. In Britain, a Chinese retailer has picked up the royal tailor Gieves and Hawkes, while just last month in New Zealand, the government approved an application by the Shanghai Pengxin Group to buy 16 dairy farms which are about as close to royalty as you can get in New Zealand.
The wave of deals is expected to strengthen – unlike the last one that fizzled out a little with CNOOC’s failed mega bid for Unocal. In fact, outbound deals have already tripled since 2006. It would appear that Chinese firms have dramatically improved their understanding of PR and corporate relations, giving themselves a much better chance of success. Ultimately though, the key factor is that the companies they are often interested in have very little choice. Expect some uproar and some gnashing of teeth around the British breakfast table, but a stiff upper lip will no doubt prevail, and a begrudging acceptance that this is the shape of things to come. Just think, in New Zealand, you might be able to eat a breakfast entirely produced by Chinese companies…