Chinese buyers on sidelines as national congress looms

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Deal-makers have been closely watching the volume of Chinese money flowing into Australian merger and acquisition activity dry up and it’s unlikely to change in the next few months.

China will hold its 19th National Congress in October to select the next generation of the communist nation’s political leadership and this event is being blamed for China’s ambitious overseas expansion being temporary halted.

The meeting occurs once every five years and will be held in Beijing but the Communist Party is giving little away about the details.

One thing is certain: Chinese corporate activity has ground to a halt as a result of the upcoming conference.

While it would never be made public, it seems the Communist Party has delivered an edict that the nation’s businesses should focus on China right now rather than pursuing overseas growth plans.

Also in the mix right now is the fact that tougher foreign investment restrictions imposed by Chinese regulators on $US1 billion-plus deals are still in place.

Deal-makers say the rules and the congress mean Chinese cash is staying at home right now and Sino bidders are not in play. Spotless, for instance, could have attracted some Chinese interest when it went up for sale.

One deal that bankers are watching is Latitude Financial, the former GE Money that was picked up by KKR, Deutsche Bank and Varde Partners about two years ago.

Investment bank advisers have yet to be appointed on the deal, which is shaping up to be worth about $1bn, depending on how much of the business the owners retain. It’s expected to be about 40 to 60 per cent.

KKR is the controlling shareholder so will have the final say on the structure of the deal to offload Latitude. Investment banks have yet to be officially appointed but preliminary work is under way.

Deal-makers say three years ago Chinese buyers would have been lining up to buy Latitude at top dollar. Fosun, Anbang and Hainan Group were named as the Chinese groups that would have been keen on the business.

HNA, some say, would have been especially keen on Latitude given its aggressive buying sprees.

The conglomerate owns nearly 20 per cent of Virgin Australia along with 25 per cent of the Hilton Group, which was purchased last year as part of a $US30bn spending package over the past two years.

By BRIDGET CARTER
The Australian

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