China Cos. Show Appetite for Brand Names (Unocal, Maytag, IBM PCs)

AP Feed ^ | 06.22.2005

[budanski]

China is moving into the merger-and-acquisition major leagues, as its star corporations shop for American household names like Unocal, Maytag and IBM, looking for bigger profits through global ambitions.

China's growing appetite for Western corporate icons is reflected computer maker Lenovo Group Ltd's recent takeover of IBM's personal computer business and two big deals reportedly in the making for Unocal Corp. and Maytag Corp.

"I'd expect at least a half a dozen similar deals by the end of the year," said Jack J.T. Huang, chairman of international law firm Jones Day's Greater China practice.

But the deals are not without political overtones. Lenovo's $1.75 billion purchase of IBM's PC business was only completed after a U.S. government panel concluded that the merger would not pose a national security threat.

And already the possible takeover of Unocal by a Chinese state-controlled company has raised political hackles, with some members of the U.S. Congress reportedly lobbying President George W. Bush to review the deal if it occurs.

Chinese state media reports quoted unnamed officials at China National Offshore Oil Corp., or CNOOC, as saying the company's board would meet this week and decide whether to go ahead with a $20 billion bid for Unocal, the ninth-biggest U.S. oil and gas company.

The CNOOC purchase, if it went through, would be China's largest overseas acquisition ever.

Staff who answered phones at CNOOC headquarters in Beijing could not confirm a report by the Financial Times that the state-owned company plans a counteroffer against a $16.7 billion bid by Chevron Corp.

Cash-rich companies like CNOOC, buoyed by fat profits from higher oil prices, are keen to secure oil and gas reserves to help fuel China's economic boom. El Segundo, California-based Unocal has international oil and gas operations, mainly in Asia.

But while the Chinese newcomers to the international merger and acquisition scene initially focused on energy and minerals, consumer-product companies recently have joined the fray.

Companies like the Chinese appliance maker Haier Group hope to tap into overseas distribution networks and claim well known brand names as their own.

Maytag Corp. said late Monday that it was reviewing a $1.28 billion buyout offer from Haier and two U.S. private equity firms, Bain Capital and Blackstone Group, despite having agreed to an offer by a New York investment firm.

Haier refused to comment on Wednesday.

Haier, which is based in the eastern Chinese city of Qingdao, was one of the first Chinese companies to expand internationally, setting up factories in Algeria, Mexico, Iran and Southeast Asia before it started up its first U.S. factory, in Camden, South Carolina, in 2000.

But the company's inexpensive refrigerators and washing machines have generally been sold only by discount chains like Wal-Mart. Taking over Maytag would net it a household brand name and a nationwide distribution network that could vastly expand its sales.

Maytag agreed a month ago to be acquired by Ripplewood Holdings, a New York investment firm. But in a statement late Monday, Maytag said it was considering a preliminary bid from Bain Capital, Blackstone Group and Haier America of $16 per share, $2 more per share than the offer from Ripplewood.

"We continue to support the Ripplewood transaction; however, we also believe that it is incumbent on us to pursue the possibility of achieving a higher price for our stockholders," Maytag's lead director, Howard Clark, said in the statement.

Haier's headquarters issued a statement last week saying the company was "closely watching the takeover situation for Maytag" but had not made any decisions.

Haier's ambitions have raised questions back home over its ability to effectively manage a company like Maytag, which has been struggling against rising costs, slipping profitability, sliding stock value and intense competition from Asian manufacturers.

"Watch out Haier!" cautioned an editorial in the state-run newspaper China Business News.

Prize acquisitions can turn out to be liabilities, it noted, pointing to the case of TCL Communication Technology Holdings Ltd., whose joint venture with France's Alcatel SA foundered amid rising losses for the intensively competitive cell phone business.

"When these situations can indeed be turned around by reducing costs or otherwise adding value, it's a big win for Chinese companies," says Huang. "If not, it could be a nightmare."

[jeremiah]

Is everyone out there still buying the less expensive products, or American? For me, I watch closely, and try to avoid anything made by the PRC.

[JSteff]

""When these situations can indeed be turned around by reducing costs or otherwise adding value, it's a big win for Chinese companies," says Huang. "If not, it could be a nightmare.""

I think maybe they need to walk before they run. Where as the Japanese like Toyota had a decades old plan and implementation... the Chinese do not.

There could be big problems for them.

[newzjunkey]

I attempt to buy American. Or American built (such as a Japanese brand car made in Normal, Ill.). Second, I'll buy Hecho en Mexico as an effort to keep them on *their* side of the border.

I don't go out of my way but I do check the competitor's for "Made in" information. Since I often find nothing else even among competing products, I still end up with too much "Made in China," imho.

Thank the bastard unions.