UDC buyer caught up in Chinese finance probe
Authorities in Beijing are gathering financial intelligence on big- spending conglomerates — including the buyer of NZ finance company UDC.
Banking regulators ordered lenders to report on companies that have spearheaded Chinese international expansion with hundreds of billions of dollars of debt- fuelled acquisitions in recent years.
The China Banking Regulatory Commission ( CBRC) requested information on exposure to Dalian Wanda, which owns Odeon Cinemas and the yacht builder Sunseeker, and Fosun, which last year acquired English football club Wolverhampton Wanderers.
HNA Group, a Chinese conglomerate which announced plans to buy Kiwi financier UDC in January for $ 660 million, is also in the regulator’s sights.
UDC did not wish to comment when approached yesterday.
The CBRC said it was interested in “systemic risks” to the financial system but did not comment on its specific aims. Liu Zhiqing, deputy director general of the CBRC’s prudential regulation bureau, said: “Some big companies are indeed the focus of our attention on systemic risks, because a big company has big risk exposure for banks and they could transmit to other companies.”
It was claimed that the curtain could be brought down on major international takeovers by Chinese groups.
The developments knocked Western stocks already owned by China’s conglomerates. They included Thomas Cook, in which Fosun holds an 8.2 per cent stake. The tour operator’s shares ended the day down 2.8 per cent.
Gemfields, the London- listed owner of Faberge, which this week recommended a £ 256m ($ 447.5m) takeover bid from Fosun, slipped more than 4 per cent over concerns the deal could be obstructed by events in Beijing.
Deutsche Bank, in which HNA has built up a 10 per cent stake, dipped by 1 per cent in Frankfurt. Hilton Hotels, a quarter owned by the same group, was down in New York.
Observers saw the CBRC’s moves as the latest effort by the Chinese Government to curb the frantic pace of outbound takeover activity. Capital controls introduced in 2014 have been relaxed, but authorities have signalled more scrutiny of the country’s most enthusiastic dealmakers.
This month Wu Xiaohui, the chairman of Anbang, was barred from international travel and then detained for questioning over the insurer’s US$ 30b spending spree.
The scrutiny appears to have had an effect. Outbound investment by Chinese companies in the first five months of the year was less than half last year’s figure, according to China’s commerce ministry. Overseas deals by Chinese companies hit a record US$ 170b last year.