Takeover Trend

Made in Germany, Sold to China

osram Ralph Orlowski Bloomberg
Trade fair visitors check out Osram's LED display. The company's lamp division is the latest in a series of takeovers by Chinese companies. Photo: Ralph Orlowski/Bloomberg
  • Why it matters

    Why it matters

    The wave of Chinese takeovers of German firms is likely only beginning. It’s just a matter of time until a DAX-listed company becomes a target.

  • Facts


    • Chinese investment in foreign companies more than tripled in value worldwide between 2013 and 2015 — from $154 billion to $481 billion.
    • So far this year, €10.6 billion has been spent on German companies.
    • German industry has seen a series of high-profile Chinese takeovers this year, including robot maker Kuka and a division of the Osram lighting company.
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Chinese takeover bids in Germany are on the rise. First Chinese household appliance corporation Midea took a majority stake in Kuka, then a Chinese consortium bought the lamps unit of lighting giant Osram. Combined, the two deals come to €5 billion, or $5.58 billion.

Germany is now top of the list for Chinese overseas investments.

Michael Buckley, head of M&A at the largest Chinese exchange-listed investment bank Citic, said Chemchina’s takeover of Syngenta, the Swiss seed and pesticide company, was a particularly “clear sign of a new Chinese confidence.”

The Syngenta deal, was worth $47 billion, was the second-largest international takeover this year worldwide. Of the 30 German companies making up the elite DAX stock market index, only seven are worth more than that. Anything seems possible now—as long as the Chinese government gives its approval.

Dirk Albersmeier, co-head of European M&A at JP Morgan, said a Chinese takeover of a DAX company may well be around the corner.

Certainly the Institute of World Economics and Politics of the Chinese Academy of Social Sciences is keen to see more German deals. The institute examined the world’s 57 most important economies, and came out in favor of Germany.

“In the next 3 years, we will see more Chinese deals than we’ve seen in the last 30.”

Dirk Albersmeier, co-head of European M&A, JP Morgan

“Germany, with its lone AAA rating, is the best investment country for Chinese companies. Of course, the United States and other industrial countries are in the picture, but they do not have an AAA rating,” said Yuyan Zhang, head of the Boao Forum for Asia, a high-ranking meeting of political, economic and academic leaders, modeled on the World Economic Forum.

The Boao Forum took place before the Brexit referendum of June 23. Now Germany seems even more attractive than it did before. “After Brexit, some top Chinese managers are thinking of moving their European headquarters from Britain to Germany,” said Yi Sun, a partner at management consultants E&Y.


02 p28 Billion Dollar Deals-01


Asian businesspeople are enthusiastic about the seriousness of German corporate culture, said Huanping Zhang, head of Euroasian Consulting, a European M&A boutique with Chinese roots. A former employee of Dresden Bank who studied in China and Cologne, Mr. Zhang knows both worlds.

Many German industrial standards have been adopted, he said, like the electrical plug, or the European Union standards in electrical cars. And finally, China admires German political stability and foreign policy — important considerations for businesspeople who keep a close eye on politics.

For Mr. Zhang, the wave of Chinese takeovers has not yet peaked. His company alone, he said, annually received around 100 inquiries from Chinese companies with investment targets in Germany. The numbers give a clear indication of the exponential growth. So far this year, the volume of Chinese M&As in Germany comes to $10.6 billion, according to Dealogic. This includes 27 separate deals like the Osram unit takeover.

Nothing like this has been seen over the last decade, and the year is barely halfway through. The previous annual record was $2.6 billion in 2014, a quarter of the current level. The takeovers have also been popular with German investors. In the case of Kuka, the premium over the listed stock price was 36.24 percent — a very attractive deal.

One small cloud on the horizon could be the failed sale last month of Frankfurt Hahn airport to Chinese buyers. To the embarrassment of the state government of Rhineland-Palatinate, their prospective Chinese buyers turned out to be highly unreliable. Politicians are under fire for not conducting the necessary due diligence.

Nonetheless, experts remain optimistic. “In the next three years, I suspect we will see more deals with Chinese participation than we’ve seen in the last 30,” said Mr. Albersmeier, who recently led a team to China, introducing potential investors to some 85 opportunities in Europe. Mr. Albersmeier speaks of an “unbelievably optimistic mood.”

For the first time in history, Chinese businesses are accepted around the world as credible buyers, and can acquire companies which would take years to build up from scratch. “Right now, there are said to be 200 Chinese companies targeting acquisitions in Europe and the USA,” he added.

“After Brexit, top Chinese managers are thinking of moving their European headquarters from Britain to Germany.”

Yi Sun, partner, E&Y management consultants

The picture was quite different before 2008. Chinese companies were focused on domestic growth and could get growth of around 10 percent a year.

But now companies are also looking to buy, and are happy with a return of 3 to 4 percent. Chinese companies are now looking for solid western companies to support them in their domestic expansion, giving their products an upmarket cachet, said Mr. Albersmeier.

Chinese companies will likely invest heavily in automation for the future, said Mr. Zhang, citing rising labor costs in China. Market saturation also means companies look to diversity, as household appliance maker Midea did in buying robot manufacturer Kuka.

Ms. Sun points out that Chinese investors are also looking at new areas such as clinics and retirement homes. In biopharma, smaller companies were coming into focus as takeover targets, previously only interesting to venture capitalists. In the consumer goods, the popular companies are those that sell well-known brands to the emerging Chinese middle class, as with kitchenware company WMF this year, although in that case, the French SEB Group came out in front.

Despite takeover activities from from China, “there is no state master-plan, that’s a myth,” said Mr. Zhang. The reasons for the upsurge were purely economic. However, deals worth more than €1 billion must be approved by the National Development and Reform Commission.

The only factor that may slow the buying spree is that the Chinese government is keen to prevent is any weakening of the yuan because of too many overseas takeovers. “Beijing wants to avoid devaluation,” Ms. Sun confirms.


Peter Köhler is a Handelsblatt editor in Frankfurt, reporting on banks, private equity firms, venture capital and corporate funding. Robert Landgraf is Handelsblatt’s chief correspondent for financial markets. Stephan Scheuer is Handelsblatt’s China correspondent, based in Beijing. To contact the authors: koehler@handelsblatt.com, landgraf@handelsblatt.com, scheuer@handelsblatt.com.

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