Zhong­wang drops $2.3b bid for Aleris

Trou­bled deal sig­nals ‘ris­ing US pro­tec­tion­ism’

Global Times - - Business - By Xie Jun and Huang Ge

Zhong­wang USA LLC, an in­vest­ment firm backed by Chi­nese alu­minum gi­ant China Zhong­wang, has ter­mi­nated its merger agree­ment with Aleris Corp by mu­tual agree­ment be­cause of re­sis­tance from the US gov­ern­ment, ac­cord­ing to a press re­lease Zhong­wang USA sent to the Global Times on Tues­day. Ex­perts said that the fail­ure of the deal demon­strated Chi­nese com­pa­nies’ in­creas­ing

dif­fi­cul­ties in in­vest­ing in the US, where the en­vi­ron­ment is be­com­ing tougher for Chi­nese cap­i­tal. How­ever, they said, China and the US should work to­ward smoother busi­ness re­la­tions.

The Zhong­wang merger en coun­tered strong un­cer­tainty about win­ning ap­proval from the Comt mit­tee on For­eign In­vest­ment in the US (CFIUS), push­ing the par­ties to call an end to the deal, the press re­leased noted.

The CFIUS re­views over­seasin­vest­ment in the US to iden­tify po­ten­tial na­tional se­cu­rity risks.

Zhong­wang USA ex­pressed dis­ap­point­ment that the ac­qui­si­tion would not pro­ceed, say­ing that “through the pro­posed ac­qui­si­tion, the com­pany was com­mit­ted to pre­serv­ing Amer­i­can jobs and in­vest­ing sub­stan­tial funds into Aleris, be­yond the pur­chase price.”

Zhong­wang USA pro­posed the $2.3bil­lion deal in Au­gust 2016.

Zhong­wang USA

said that the com­pany and its in­vestors will con­tinue to pur­sue ex­pan­sion op­por­tu­ni­ties, in­clud­ing “pos­i­tive, job-cre­at­ing op­por­tu­ni­ties in the US and other parts of the world,” ac­cord­ing to the state­ment.

“This is not the out­come we in­tended,” Aleris said in a state­ment on its web­site on Mon­day. It had not com­mented fur­ther as of press time.

“The US is par­tic­u­larly sen­si­tive about over­seas coun­tries snatch­ing its ad­vanced tech­nolo­gies or rare re­sources,” Wu Chen­hui, a Bei­jing­based rare-earths an­a­lyst, told the

Global Times on Tues­day.

He added that US pro­duc­tion of alu­minum is very lim­ited. “Alu­minum has a wide range of ap­pli­ca­tions for dif­fer­ent in­dus­tries,” in­clud­ing de­fense pur­poses such as the con­struc­tion of aero­space equip­ment. “That may be why the CIFUS held up the deal,” he noted.

Bai Ming, a re­search fel­low at the Chi­nese Academy of In­ter­na­tional Trade and Eco­nomic Co­op­er­a­tion, told the Global Times on Tues­day that the CFIUS’ in­ter­fer­ence in over­seas merg­ers and ac­qui­si­tions (M&As) of US com­pa­nies is “a form of pro­tec­tion­ism.”

The failed merger comes as the US gov­ern­ment moves to tighten scru­tiny and man­age­ment on Chi­nese in­vest­ment in the US.

Ac­cord­ing to a re­port by US fi­nan­cial net­work CNBC on Oc­to­ber 25, pro­posed leg­is­la­tion in the US Congress would ex­pand the CFIUS’ ju­ris­dic­tion to re­view non-con­trol trans­ac­tions that re­sult in ac­cess to tech­nol­ogy, as well as ex­pand­ing its au­thor­ity to re­view over­seas joint ven­tures.

In Septem­ber, the US gov­ern­ment blocked a pro­posed Chi­nese takeover of Lat­tice Semi­con­duc­tor, a US-based pro­ducer of crit­i­cal tech­nol­ogy for US mil­i­tary ap­pli­ca­tions, ac­cord­ing to over­seas me­dia re­ports.

Such pro­tec­tion­ism will make it harder for Chi­nese com­pa­nies to in­vest in the US and af­fect US com­pa­nies’ com­pet­i­tive­ness, “as many US com­pa­nies do need over­seas M&As,” Bai said.

The pur­pose of the deal – Sino US eco­nomic co­op­er­a­tion – was “very clear, al­though it would have faced a rough road,” Cong Yi, a pro­fes­sor at the Tian­jin Univer­sity of Fi­nance and Eco­nom­ics, told the Global Times on Tues­day.

Cong said that China and the US are the two largest economies in the world, and their eco­nomic co­op­er­a­tion will serve their own in­ter­ests and have a pos­i­tive im­pact on the global econ­omy.

“But the US seems to ig­nore this and is al­low­ing iso­la­tion­ism to rise in the coun­try,” Cong noted.

Chi­nese com­pa­nies must “go out” to get good tech­nolo­gies and make up for the short­com­ings in their in­dus­trial chains, ac­cord­ing to Cong.

“In terms of the US, we should first strengthen diplo­matic and cul­tural co­op­er­a­tion with the coun­try, and eco­nomic co­op­er­a­tion can be ex­tended as a re­sult. This might take many years, but we can­not stop our ef­forts just be­cause of tem­po­rary dif­fi­cul­ties,” he added.

The pur­pose of the deal – Sino US eco­nomic co­op­er­a­tion – was “very clear, al­though it would have faced a rough road.” Cong Yi Pro­fes­sor at Tian­jin Univer­sity of Fi­nance and Eco­nom­ics

Photo: VCG

The of­fice build­ing of China Zhong­wang in Dong­gang busi­ness district, Dalian, North­east China’s Liaon­ing Prov­ince in May 2017.

Newspapers in English

Newspapers from China

© PressReader. All rights reserved.