China’s most sophisticated bidders have developed a consistent playbook to minimize backlash. Hostile takeovers are virtually off limits, while friendly offers are often revealed only after years of informal courtship. There are pledges to keep existing management teams in place, investment guarantees lasting half a decade or more and steps to preserve independent oversight.
For the Kuka deal, Midea pledged to maintain existing plants and jobs until at least 2023 -- far longer than the norm for similar deals -- and promised to keep customer data walled off from the Chinese parent company. It deployed vice president Andy Gu, a social scientist by training with a doctorate from Cornell University, to make those assurances face-to-face with the German economy minister’s senior staff, according to people with knowledge of the matter.
Meanwhile, Kuka helped ease any concerns among its customers, the people said, asking not to be identified because the information is private. A representative for Midea declined to comment, while a spokeswoman for Kuka said she couldn’t immediately comment.
Midea has been quick to pounce on other opportunities as well. The Chinese company sent a letter stating its willingness to acquire General Electric Co.’s appliance arm within 24 hours of an existing deal with Electrolux AB falling through, according to people with knowledge of the matter. Though it lost in the end, the eventual winner was domestic rival Qingdao Haier Co. with a $5.4 billion bid, rather than a more-established Western competitor.
Planes, Video Games
This year’s announced deals have also included China National Chemical Corp.’s $43 billion takeover of Switzerland’s Syngenta AG, which would be the biggest-ever foreign acquisition by a Chinese company. Tencent Holdings Ltd. led an $8.6 billion deal in June for Finnish video-game maker Supercell Oy, while HNA Group Co. agreed this month to buy a $10 billion aircraft-leasing business from CIT Group Inc.
The “acquisition wave out of China is still broadening and deepening,” said Joseph Gallagher, the Hong Kong-based head of Asian M&A at Credit Suisse Group AG.
For a QuickTake explainer on China’s M&A boom, click here.
While Chinese mega-deals have spanned a wide range of industries, the ChemChina-Syngenta transaction may be the most instructive as a guide to the country’s new approach to acquisitions. The offer created almost no controversy in Syngenta’s home base of Switzerland, even as it gave a state-controlled Chinese company a central role in the global food industry.
Enthusiastic Endorsement
The lack of opposition stemmed in large part from Syngenta’s enthusiastic endorsement of the deal, according to people involved in the transaction. The takeover was structured to keep existing managers in their jobs, retain a Swiss headquarters and work toward a future re-listing of the company.
Early in negotiations, ChemChina asked Syngenta to propose a governance structure for the combined company, giving the takeover target an unusual lead role in the deliberations, the people said. ChemChina pushed back on a few minor elements, but the structure proposed by Syngenta was largely incorporated in the final agreement, the people said.
A representative for ChemChina didn’t immediately respond to an e-mail seeking comment. Leandro Conti, a spokesman for Syngenta, said the ChemChina offer ensures continued choice for growers at a time when considerable consolidation is taking place in the industry.
“It is not a merger, but simply a change in share ownership,” Conti said in an e-mailed statement. “It also ensures that ‘Syngenta remains Syngenta."
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