Nov 30 (Reuters) - If Dutch cable maker Draka accepts the 1 billion euro ($1.3 billion) bid by China's Xinmao, the deal will still need to pass one more hurdle: Chinese regulatory approval.
Chinese state-owned and private enterprises have stepped up mergers and acquisitions of overseas companies in the aftermath of the global financial crisis, but the road has been bumpy, with at least one high-profile deal failing to win approval.
Below are some facts about Chinese M&A and how the country's regulators evaluate deals.
APPROVAL PROCESS
The Chinese regulatory approval process is opaque and still evolving. There is no such thing as a step-by-step guide to successful cross-border M&A.
- The Ministry of Commerce is the regulatory body that examines and approves cross-border M&A. Last year, the ministry announced regulations governing Chinese enterprises investing in overseas non-financial firms.
- Cabinet approval is needed for certain big deals: those involving natural resources worth $200 million or more, or transactions requiring more than $50 million in foreign exchange.
- Some smaller deals instead need the approval of the National Development and Reform Commission (NDRC), the country's top economic planning agency. That's the case for natural resources deals worth more than $30 million and transactions requiring more than $10 million in foreign exchange.
- To remit money overseas, enterprises need the blessing of the State Administration of Foreign Exchange, the arm of the central bank that manages China's official currency reserves.
- Central government-run enterprises need the permission of the State-owned Assets Supervision and Administration Commission and the Commerce Ministry to invest abroad.
- Chinese authorities insist they be the last regulators to approve transactions. They are also reluctant to approve deals that are at a formative stage and may potentially change, making it difficult for Chinese companies to move quickly on some deals.
NOTABLE CROSS-BORDER M&A DEALS
- Ford Motor chose Zhejiang Geely Holding, China's largest none-state auto firm and parent of Hong Kong-listed Geely Auto, last year as the preferred bidder for Volvo car unit in a $1.8 billion deal.
- Tengzhong Heavy Industrial Machinery, an obscure maker of heavy equipment in the southwestern province of Sichuan, failed to win regulatory approval to buy General Motors' gas-guzzling Hummer brand in February this year.
- State-owned CNOOC withdrew its $18.5 billion bid to buy U.S. oil firm Unocal in 2005 after U.S. lawmakers threatened to block a takeover, citing a lack of reciprocal access in a country which is at loggerheads with Washington over trade more generally.
- Chinalco's proposed $19.5 billion tie-up with mining giant Rio Tinto hit stiff political opposition in Australia last year. Chinalco previously bought a stake in Rio, spoiling a hostile takeover attempt by rival Australian miner BHP Billiton .
- Lenovo Group, China's top personal computer maker, bought IBM's PC business for $1.25 billion in 2005. ($1=6.67 Yuan) (Source: Jones Day, Clifford Chance, Chinese government websites and Reuters) (Reporting by Benjamin Kang Lim; Editing by Anshuman Daga)(benjamin.lim@thomsonreuters.com; +8610 6627-1212; Reuters Messaging: benjamin.lim.reuters.com@reuters.net)) (If you have a query or comment on this story, send an email to newsfeedback.asia@thomsonreuters.com))