There has been some confusion in recent months about the unprecedented M&A buying spree unleashed by Chinese investors on international, but mostly U.S. targets, a spree which has already resulted in a record amount of Chinese outbound M&A capital, manifesting in $41 billion in US deals in just the first quarter, already double the full amount for 2015…
… funded by just as outbound M&A capital:
The truth is that there is nothing confusing about this: outbound M&A capitalallowing domestic oligarchs to bypass Chinese capital controls and park billions in equity on U.S. and international soil. It also explains the complete lack of price sensitivity when Chinese bidders rush to purchase any desired target as can be seen in the most recent example involving global hotel chain Starwood and its Chinese acquiror, shady insurance company Anbang. The reason is that contrary to conventional M&A where the transaction IRR is determined by the purchase price (the lower the better), for Chinese “bizarro M&A” deals, the more capital that can be invested offshore, the better – it simply means that even more capital will evade the Chinese financial system.
In many ways, Chinese “bidders” are now the full-blown replica of what Japanese buyers were in the 1980s, when at the height of the Japanese stock bubble, every US assets was fair game, including golf courses and, of course, the the Rockefeller Center.
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So what U.S. assets are these rabid Chinese buyers after? Here, courtesy of Bloomberg, is a sample of what Chinese money is buying.
Luxury Hotels
Strategic Hotels & Resorts Inc.’s portfolio includes Four Seasons properties in Austin and Silicon Valley, as well as the Intercontinental Miami and Chicago. China’s Anbang Insurance Group Co. is paying about $6.5 billion to buy the hotel group from Blackstone Group LP—just three months after the New York-based private equity firm acquired it.
