CHCJY China CITIC Bank (PK)

   (FROM THE WALL STREET JOURNAL 2/22/16) 
   By Rick Carew and Julie Steinberg 

HONG KONG -- China doesn't need Wall Street after all.

China Citic Bank Corp. and China International Capital Corp. are snagging important merger-and-acquisition assignments from Chinese companies, which are snapping up Western assets at the fastest clip ever.

The banks are supplanting the Wall Street firms that spent more than a decade preparing for just such a surge.

In a year that has already produced $81.5 billion of foreign acquisitions by Chinese companies -- blowing away the pace in any prior year -- not a single big Wall Street bank is among the top three buy-side advisers, according to Dealogic. Instead there are names like China Citic and CICC. London-based HSBC Holdings PLC along with China Citic are up there owing to their roles advising China National Chemical Corp. on its $43 billion agreement to buy Swiss pesticide maker Syngenta AG.

Emblematic of the surge, it is the largest purchase ever by a Chinese company and those banks are helping arrange a lending package that, along with the advisory work, is likely to generate tens of millions of dollars in fees.

The best showing by a big Wall Street bank comes from Bank of America Merrill Lynch, which is tied for fifth.

Chinese firms have a growing set of advantages over their Western counterparts. They tend to have better relationships with Chinese regulators, which "save[s] a lot of time and effort" for companies seeking approval for overseas investments, said Cliff Sheng, head of greater China financial services at management consultant Oliver Wyman in Beijing.

Deal makers say Chinese banks can better gauge shifting political tides and connect more easily with less-sophisticated local buyers. They benefit from deep local corporate ties as well as an ability to tap vast reserves of cash for loans at a time many Western banks are retrenching.

Then there is the know-how when it comes to international deal making. Once the locked preserve of Western firms, it is no longer proprietary.

"Chinese banks are learning from Western banks and changing the competitive landscape," said Fang Jian, China national managing partner at U.K.-based law firm Linklaters.

Another factor: Many of today's most aggressive Chinese acquirersare relatively unknown to Wall Street banks.

New aggressive government offshoots, such as Tsinghua Unigroup Ltd. and Shanghai Pudong Science & Technology Investment Co., are pushing into semiconductor deal making, for example, which has become a priority for Beijing. They are taking over from companies that are well known by Wall Street bankers, such as personal-computer maker Lenovo Group Ltd. and China Mobile Ltd.

Beijing-based CICC won a plum role advising HNA Group on its agreement to buy technology distributor Ingram Micro Inc. for $6 billion. CICC was founded in 1995 as a joint venture between state bank China Construction Bank Corp. and Morgan Stanley. Control of the investment bank was wrested from Morgan Stanley by its Chinese managers in the early 2000s.

China Citic Bank is the banking arm of Citic Ltd., a state-owned conglomerate created in the 1970s to establish global trade links. It has grown into a sprawling empire with a big brokerage arm, Citic Securities Co., and interests from property to mining.

Firms such as CICC and China Citic have bigger, less-well-paid local armies of bankers than their Wall Street counterparts. They are generally willing to take lower fees -- Chinese companies are famously stingy on that score -- and bet on unknown firms that might have a lower success rate in closing M&A deals. Part of that is born of necessity, because they don't have relationships that would afford them the luxury of advising more deal-seasoned Western firms.

Wall Street banks now often find themselves advising U.S. or European targets of China's growing ambition. Morgan Stanley advised Ingram Micro and Goldman Sachs Group Inc. advised General Electric Co. on the January agreement to sell its appliance unit to Chinese manufacturer Haier Group.

Global investment banks say Chinese companies still need their help navigating Western markets and expertise and connections with global targets, which Chinese banks lack given their limited presence outside the country.

Chinese advisers rarely encounter Western antitrust or national security reviews, for example.

Chinese firms' proposed acquisitions are coming under scrutiny in the U.S. Last week, House Republicans asked the Committee on Foreign Investment in the U. S. -- the government body that screens foreign takeovers for security concerns -- to look closely at Chongqing Casin Enterprise Group's recent agreement to buy the Chicago Stock Exchange.

Last month, Philips NV said it was terminating its $2.8 billion deal to sell its Lumileds LED lightbulb business to an investment fund led by Chinese venture-capital firm GSR Ventures following undisclosed concerns from the U.S. screening body.

(END) Dow Jones Newswires

February 22, 2016 02:47 ET (07:47 GMT)

China CITIC Bank (PK) (USOTC:CHCJY)
Historical Stock Chart
From May 2024 to Jun 2024

China CITIC Bank (PK) (USOTC:CHCJY)
Historical Stock Chart
From Jun 2023 to Jun 2024