M&A in Asia soars as companies grab opportunities
Sundeep Tucker | Tuesday, 24 June 2008
THE value of mergers and acquisitions (M&As) Asia is soaring as the region's leading companies take advantage of opportunities to build scale and secure resources in fast-growing markets closer to home.
The aggregate value of announced cross-border deals between Asia-Pacific companies has totalled $54bn in the year to date, according to figures from Dealogic, the data provider. This compares to $25.7bn during the corresponding period last year.
Bankers report that deals currently in the pipeline should mean 2008 will be a record year for intra-Asian deals, eclipsing last year's mark of $76.2bn. The value of intra-Asian deals has risen steadily since 2004, when combined deal activity totalled $35.2bn.
The growth in regional M&A was underscored in the second week of this month by the surprise announcement that Daiichi Sankyo, Japan's third-largest pharmaceutical company, plans to take control of Ranbaxy Laboratories, India's biggest generic drugs maker.
If successful, the cash deal, worth up to $4.6bn, will be the biggest acquisition of a listed Indian company. It has shocked corporate India, which has become used to its leading companies acquiring assets in the US and Europe.
Regional consolidation has been led by outbound Chinese investment into the financial services and resource sectors. There has also been strong cross-border activity across south-east Asia.
Bankers attribute the growth in Asian M&A to strong economic growth, increasing scale and financial capabilities of the region's corporations and rising confidence among senior management ranks to execute overseas deals.
Colin Banfield, head of Asia-Pacific M&A for Lehman Brothers, said the acquisition of a $14bn stake in Rio Tinto by a China-led consortium highlighted the ability of the region's corporations to play a leading role in globally significant deals.
Analysts believe Chinalco, which was advised by Lehman, purchased the stake in February to try to thwart BHP Billiton's planned $180bn takeover of Rio.
Mr Banfield added: "Asian companies continue to acquire assets within Asia because of the high growth potential of the individual markets, closer alignment of these businesses with their existing operations, a cultural fit and the expectation that they will ultimately be easier to manage and integrate."
Mark Renton, Citigroup's head of investment banking for Asia-Pacific, said: "Asian companies are taking advantage of strong balance sheets and ready access to capital to create regional champions capable of becoming major global players in sectors ranging from telecoms to resources."
Mr Renton cited the examples of Malaysia's Petronas, which last month agreed to invest $2.5bn in a liquefied natural gas project being developed by Australia's Santos, and Sinopec's $600m deal in March to acquire some assets of Australia's AED Oil in the Timor Sea - China's first Australian oil acquisition.
Citi advised Santos and Sinopec on the respective deals.
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The aggregate value of announced cross-border deals between Asia-Pacific companies has totalled $54bn in the year to date, according to figures from Dealogic, the data provider. This compares to $25.7bn during the corresponding period last year.
Bankers report that deals currently in the pipeline should mean 2008 will be a record year for intra-Asian deals, eclipsing last year's mark of $76.2bn. The value of intra-Asian deals has risen steadily since 2004, when combined deal activity totalled $35.2bn.
The growth in regional M&A was underscored in the second week of this month by the surprise announcement that Daiichi Sankyo, Japan's third-largest pharmaceutical company, plans to take control of Ranbaxy Laboratories, India's biggest generic drugs maker.
If successful, the cash deal, worth up to $4.6bn, will be the biggest acquisition of a listed Indian company. It has shocked corporate India, which has become used to its leading companies acquiring assets in the US and Europe.
Regional consolidation has been led by outbound Chinese investment into the financial services and resource sectors. There has also been strong cross-border activity across south-east Asia.
Bankers attribute the growth in Asian M&A to strong economic growth, increasing scale and financial capabilities of the region's corporations and rising confidence among senior management ranks to execute overseas deals.
Colin Banfield, head of Asia-Pacific M&A for Lehman Brothers, said the acquisition of a $14bn stake in Rio Tinto by a China-led consortium highlighted the ability of the region's corporations to play a leading role in globally significant deals.
Analysts believe Chinalco, which was advised by Lehman, purchased the stake in February to try to thwart BHP Billiton's planned $180bn takeover of Rio.
Mr Banfield added: "Asian companies continue to acquire assets within Asia because of the high growth potential of the individual markets, closer alignment of these businesses with their existing operations, a cultural fit and the expectation that they will ultimately be easier to manage and integrate."
Mark Renton, Citigroup's head of investment banking for Asia-Pacific, said: "Asian companies are taking advantage of strong balance sheets and ready access to capital to create regional champions capable of becoming major global players in sectors ranging from telecoms to resources."
Mr Renton cited the examples of Malaysia's Petronas, which last month agreed to invest $2.5bn in a liquefied natural gas project being developed by Australia's Santos, and Sinopec's $600m deal in March to acquire some assets of Australia's AED Oil in the Timor Sea - China's first Australian oil acquisition.
Citi advised Santos and Sinopec on the respective deals.
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