Asia's tycoons seeking cheap assets

HONG KONG • Asian tycoons are looking to snap up assets pummelled by the coronavirus pandemic at bargain prices, but they are also facing hurdles as more governments seek to deter foreign takeovers of local firms.

Over the past three months, top executives of companies based in mainland China, Hong Kong and Singapore have told investors that they are looking for acquisitions.

They include Mr Victor Li, who took over Hong Kong's CK Group from his father Li Ka Shing two years ago, and billionaire Guo Guangchang, founder of the acquisitive Chinese conglomerate Fosun Group.

Major stock indexes in the United States, Europe and the Asia-Pacific all plunged about 20 per cent in the first quarter of this year in their worst rout since the 2008 financial crisis, making retail chains to hotels to property developers attractive to suitors.

Cash-rich conglomerates like Mr Li's CK Group are in a position to invest when others struggle as they are built to defend against bad times, said Mr Jonathan Galligan, group deputy head of research at CLSA. "This is a tremendous opportunity for any company with cash."

The junior Mr Li, now chairman of CK Hutchison Holdings, CK Asset Holdings and CK Infrastructure Holdings, told analysts on March 19 that the group's cash flow and balance sheet are strong and the impact of the virus offers "opportunities to look at new acquisitions".

CK Hutchison, the main flagship, which has seen its stock tumble 24 per cent this year, said it had HK$145 billion (S$26 billion) of cash and liquid investments as of December.

That is 3.6 times its short-term debt and 1.7 times its debt maturing over this year and the next, according to S&P Global Ratings.

The group spent US$5.5 billion (S$7.8 billion) last year acquiring assets - including British pub operator Greene King - following about US$15.2 billion of purchases the previous year, according to data compiled by Bloomberg.

The chaos triggered by the pandemic is also posing another challenge for prospective buyers.

Governments are pre-emptively trying to ward off predatory buying, with policymakers from several countries introducing or considering stricter rules to help shield strategically important domestic companies.

The regulatory barriers may make some acquisitions harder, far from the days when Chinese conglomerates such as HNA Group loaded up on debt and paid top dollar for assets.

Mr Li, however, is no stranger to rejection by overseas regulators.

In 2018, Australia rejected CK's bid to buy APA Group, an operator of gas pipelines, for A$13 billion (S$11.7 billion) on national security concerns.

Had the acquisition been successful, it would have been CK's biggest overseas purchase.

In its wake, the pandemic is likely to leave behind many ruined businesses, after billions of people spent days in lockdown and curtailed spending.

In the US, 50,000 retail stores have shut in just over a week. More than half of British firms have just three months' cash in reserve or less, according to a survey by the British Chambers of Commerce.

The MSCI Europe Consumer Discretionary Index has declined 27 per cent this year. Even a world index that represents telecommunications, utilities and energy companies has dropped 16 per cent.

Mr Guo, Fosun International's chairman, said on March 31 that the company will leverage its worldwide resources to identify opportunities.

The company had 93.6 billion yuan (S$18.8 billion) in cash and equivalents last year, compared with 82.7 billion yuan of short-term debt, according to data compiled by Bloomberg.

The group is into healthcare, insurance and hospitality.

Mr Galligan said that should the economic pain intensify, some countries may welcome investments.

BLOOMBERG

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A version of this article appeared in the print edition of The Straits Times on April 13, 2020, with the headline 'Asia's tycoons seeking cheap assets'. Print Edition | Subscribe