* Transparency, timing undid Xinmao's attempt
* Government relations key to a winning China bid
* 3 phone numbers Xinmao listed on releases did not work
* Slow, unclear replies from Beijing on enquiries about the bid (For more Reuters DEALTALKS click
By Terril Yue Jones and Michael Flaherty
BEIJING/HONG KONG, Jan 7 (Reuters) - If there are 10 steps to successfully gatecrashing a large, cross-border, public acquisition, China's Xinmao seems to have missed most of them.
Xinmao, a conglomerate little known outside its hometown of Tianjin, pulled the plug on its 1 billion euro ($1.3 billion) bid for Dutch cable company Draka on Thursday, conceding it would be unable to formally launch an offer before Italian rival Prysmian closed its 870 million euro agreed bid. [ID:nLDE7050QD]
While Xinmao's failure highlights the difficulties Chinese buyers often have with pursuing international takeover deals, the main culprit of the botched attempt appears to be Xinmao itself.
To the company's credit, Xinmao made a bold offer with a big premium. It hired first a Dutch boutique and later another adviser, as well as winning the backing of China Minsheng Banking Corp Ltd , a mid-size Chinese bank.
But after Xinmao first delivered its offer, more questions than answers seemed to spring from the bid.
Among the early questions that surfaced from Asia investment bankers is why didn't Xinmao hire a big name, international M&A firm for such a complex, and controversial cross-border offering?
"You don't hire a dentist to perform open heart surgery," said a Hong Kong based-banker at a large foreign investment bank who declined to identified.
Neither Catalyst, the Dutch boutique advising Xinmao, nor Rabobank, the Dutch bank brought on as another adviser at the end of the deal, crack the top 30 firms in the Thomson Reuters M&A league tables.
TIMING
Xinmao's failed takeover attempt underscores how critical it is for a Chinese company to be as transparent and well prepared as possible when launching an overseas bid -- never mind a bid that trump's an existing, board approved offer.
For any gatecrash, time is of the essence, and yet, Xinmao's attempt seemed to drag on slowly. It didn't help that Draka was initially unclear over whether or not Xinmao's contact with the company was an actual takeover offer. One of the key obstacles that became clear in the end for Xinmao was that it didn't have the early backing of the host of China regulators needed to approve international deals.
The best Xinmao could offer was the promise of lodging a formal offer with Dutch regulators by Feb. 14. Prysmian had a fully backed acquisition deal in December and got a green light from regulators this week for an offer due to close on Feb. 3.
While it would seem easy to place blame on China's bureaucracy for delays on this deal, authorities appear to have moved in the same pace they would with any new cross-border acquisition effort that crosses their desk.
Still, getting information from Chinese regulators on the status of transactions remains a difficult task, from corporates to the media -- an issue that can impact a time-sensitive deal.
"The relevant bureaus have been very busy and probably have not been able to look into it," a Commerce Ministry spokeswoman said Friday about a Reuters request for information on Dec. 21.
Neither was it obvious that Xinmao had made any serious attempts to lobby Draka shareholders to support its offer ahead of the target company's meeting on the Prysmian bid.
And even if inaccurate, there is a perception of Chinese buyers that often taints their interest.
"I think there is an over-excitement about Chinese pushes abroad. There's an outcry that China is scooping up assets everywhere, and it's not true," said Michael Pettis, associate professor of finance at Beijing University's Guanghua School of Management.
"China's total outward investment is $60-$70 billion dollars a year, which is really pretty small for a country its size."
Still, the deal was handicapped by misgivings over a Chinese company taking over a globally prominent European group.
Not helping matters was that Xinmao offered little public information at the time about its company, its founder or its business plan.
MONEY
Xinmao said the deal was fully financed by Minsheng Bank, China's seventh-largest lender, and produced a letter to that effect. That lent credibility to the deal, but both Xinmao and Minsheng steadfastly declined to provide details of the financing, and whether the Tianjin or central Beijing governments were party to the deal in any way.
Xinmao's corporate communications department claimed to have no details of the Draka deal, and none of the three corporate headquarters phone numbers that Xinmao listed on its press releases worked.
Neither Catalyst nor Xinmao's Dutch spokesman would comment about the deal.
If Xinmao and its advisers wooed and warned regulators before the bid, it didn't show. Among other factors, the time it took for government approvals was the deal's undoing in the end.
"I almost wonder if it might be more important for Chinese companies to be a little more assertive on the government relations front when they're looking at these transactions," said Philip Partnow, deputy head of investment banking and head of China M&A for UBS Securities. Partnow was speaking generally to Reuters last month, and not specifically about Xinmao.
For a Chinese buyer, he spoke of the importance of "really considering the politics behind the deal in addition to the more technical aspects you normally look at in an M&A situation, and trying to do work on that, either as an assessment, or part of the process, or trying to understand what is the art of the possible." (Additional reporting by Zhang Shengnan in Beijing and Lee Chyen Yee in Hong Kong; Editing by Lincoln Feast)