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China shows appetite for takeovers

A Chinese man pushes a shopping cart past washing machines, some manufactured by home appliances giant Haier at a shopping mall in Beijing earlier this month. China is moving into the merger and acquisitions major leagues. (Associated Press / The Spokesman-Review)
Associated Press
A Chinese man pushes a shopping cart past washing machines, some manufactured by home appliances giant Haier at a shopping mall in Beijing earlier this month. China is moving into the merger and acquisitions major leagues. (Associated Press / The Spokesman-Review)

SHANGHAI, China — China is moving into the merger-and-acquisition major leagues, as its star corporations shop for American household names like Unocal, Maytag and IBM, looking for bigger profits through global ambitions.

China’s growing appetite for Western corporate icons is reflected in computer maker Lenovo Group Ltd’s recent takeover of IBM’s personal computer business and two big deals reportedly in the making for Unocal Corp. and Maytag Corp.

“I’d expect at least a half a dozen similar deals by the end of the year,” said Jack J.T. Huang, chairman of international law firm Jones Day’s Greater China practice.

But the deals are not without political overtones. Lenovo’s $1.75 billion purchase of IBM’s PC business was only completed after a U.S. government panel concluded that the merger would not pose a national security threat.

And already the possible takeover of Unocal by a Chinese state-controlled company has raised political hackles, with some members of the U.S. Congress reportedly lobbying President George W. Bush to review the deal if it occurs.

Chinese state media reports quoted unnamed officials at China National Offshore Oil Corp., or CNOOC, as saying the company’s board would meet this week and decide whether to go ahead with a $20 billion bid for Unocal, the ninth-biggest U.S. oil and gas company.

The CNOOC purchase, if it went through, would be China’s largest overseas acquisition ever.

Staff who answered phones at CNOOC headquarters in Beijing could not confirm a report by the Financial Times that the state-owned company plans a counteroffer against a $16.7 billion bid by Chevron Corp.

Cash-rich companies like CNOOC, buoyed by fat profits from higher oil prices, are keen to secure oil and gas reserves to help fuel China’s economic boom. El Segundo, California-based Unocal has international oil and gas operations, mainly in Asia.

But while the Chinese newcomers to the international merger and acquisition scene initially focused on energy and minerals, consumer-product companies recently have joined the fray.

Companies like the Chinese appliance maker Haier Group hope to tap into overseas distribution networks and claim well known brand names.

Maytag Corp. said late Monday that it was reviewing a $1.28 billion buyout offer from Haier and two U.S. private equity firms, Bain Capital and Blackstone Group, despite having agreed to an offer by a New York investment firm.

Haier, which is based in the eastern Chinese city of Qingdao, was one of the first Chinese companies to expand internationally, setting up factories in Algeria, Mexico, Iran and Southeast Asia before it started up its first U.S. factory, in Camden, South Carolina, in 2000.

But the company’s inexpensive refrigerators and washing machines have generally been sold only by discount chains like Wal-Mart. Taking over Maytag would net it a household brand name and a nationwide distribution network that could vastly expand its sales.