Shandong Province M&A Review and Outlook

Transcription

1 Shandong Province M&A Review and Outlook

2 Foreword explanation of data shown in this presentation (1/) The data presented in this report is provided by ZeroIPO, and Wind Information, with analysis unless otherwise stated. ZeroIPO and Wind Information only disclose deals that have been officially announced to the public which may be still in progress at the time of writing. The number of deal transactions refers to the information announced to the public, monetary value of each transaction may not be disclosed in this presentation due to confidentiality. The monetary value of deals disclosed in this presentation only include public available information (referred to disclosed value ). The term Domestic refers to Mainland China. The terms Foreign or Outbound refer to deals in which companies from Mainland China acquire companies based in Hong Kong, Macau or other foreign countries or regions. The terms Inbound refer to deals in which companies from foreign countries or regions acquire companies based in Mainland China. Private equity fund transactions refer to equity transactions carried out by financial investors or transactions executed by a private equity fund with no monetary value disclosed. Such transactions are mostly managed by private equity management companies, but may include transactions executed by financial institutions or corporations which are fundamentally with private equity investment nature. Shandong Province M&A Review and Outlook

3 Foreword explanation of data shown in this presentation (/) Strategic investors refer to corporation investors who incorporates acquired companies into its existing business operation after acquisition completed (compared with financial investors ). Financial investors refer to investors perform M&A transactions with the aim of making profit from future disposal of acquired assets/equities; including but not limited to private equity funds and venture capital funds. Deal value is translated based on relevant exchange rates from December 31, 014 to December 31, 016. Shandong Province M&A Review and Outlook

4 Overview of M&A activities in Shandong Province Shandong Province M&A Review and Outlook

5 The M&A market in Shandong Province has grown at a fast pace from 014 to 016. As of 016, the number of transactions amounted to 311, with a total deal value of RMB 84.1 billion. In total, 9% of deals had a value above RMB 500 million, representing 19% of the total number of transactions over the period. Deals in Shandong Province from 014 to 016 (Shandong investors & Shandong investees) Deals of more than 500M Deals of more than 500M in volume Deals of less than 500M Deals of less than 500M in volume 61, , Deal amount: RMB in million 00, , ,000 50, , ,18 13, ,70 3, Number of deals Of total deal amount in China%:.6% 3.49% 5.35% Source: ZeroIPO, Wind Information, and analysis Shandong Province M&A Review and Outlook

6 The value of merger and acquisition deals has continued to grow at a fast pace. As of December 016, the number of outbound acquisitions by corporations in Shandong was 7 times higher than in 015. One factor is that increasing numbers of corporations in Shandong are looking to access overseas markets. Further, new policies encouraging SOE mixedownership reform, group restructuring and upgrades in industrial structures have led to more investors in manufacturing, energy & resources, agriculture &food industries. These increases have contributed to the rise of deal value in Shandong Province. Deals in Shandong Province from 014 to 016 (Shandong investors & Shandong investees) (More than 500M) Investors from Shandong Investees of Shandong Deal amount: RMB in million 150,000 10,000 90,000 60,000 30,000 18,975 Investors from Shandong in volume Investees of Shandong in volume , ,35 57, , , Number of deals Source: ZeroIPO, Wind Information, and analysis Shandong Province M&A Review and Outlook

7 From 014 to 016, the number of large scale transactions has increased steadily, following enhancements to M&A in Shandong province for cross border and transprovincial deal transactions, as well as improvement in capital flow. The total M&A transaction volume reached a historical high, 7 times higher than the deal value the year prior, and.3 times higher than the deal number. Deals in Shandong Province from 014 to 016 (Shandong investors & Shandong investees) (More than 500M) (By area) Deals within Shandong Cross province/border deals Deals within Shandong in volume Cross province/border deals in volume 50, ,93 60 Deal amount: RMB in million 00, , ,000 50, ,58 13, ,194 3,599 34, Number of deals Source: ZeroIPO, Wind Information, and analysis Shandong Province M&A Review and Outlook

8 M&A deals: Shandong enterprises as investors Shandong Province M&A Review and Outlook

9 From 014 to 016, private strategic investors in Shandong Province maintained an active position. In 016, the key players for overseas acquisitions were Qingdao Haier, Qingdao Wanda Culture and XiWangfood. Notably, the scale of M&A by SOEs in Shandong Province increased significantly last year. The majority of SOE deals spanned both domestic and overseas acquisitions by Weichai Power, Yanzhou Coal and Chenming Paper, seeking to optimise the industrial structure and promote industrial diversification. Deals of Shandong Investors from 014 to 016 (By investor s type) Private PE SOE Private in volume PE in volume SOE in volume 10, Deal amount: RMB in million 90,000 60,000 30,000 4, ,017 86, , ,001 7, Number of deals Total deal volume: Source: ZeroIPO, Wind Information, and analysis Shandong Province M&A Review and Outlook

10 In 014, domestic investments by Shandong enterprises mainly focused on manufacturing and energy & mining. Deals in TMT, finance and manufacturing grew rapidly in 015, representing 77% of the total number of deals. In 016, the number of deals in manufacturing and energy & mining gradually slowed down. However, deals in TMT and finance remained active. Deals of Shandong investors by investee industry (Domestic) (Deal amount) Deals of Shandong investors by investee industry (Domestic) (Deal volume) Deal amount: RMB in million 1,000 10,000 8,000 6,000 4,000,000 1,368 1, 50 10,33 5,30 9,398 8,090 5,475,90 4,534 7,984 4,749 Number of deals Source: ZeroIPO, Wind Information, and analysis Shandong Province M&A Review and Outlook

11 The scale of investment by Shandong enterprises in overseas markets was relatively large, with an average deal size of RMB 15 billion. The targeted industries for investments gradually shifted from energy & mining to TMT, manufacturing, agriculture & food and medical health; For example, Qingdao Wanda cultural acquired Legendary Pictures, Qingdao Haier acquired GE Appliances and Weichai Power invested in DHS. Deals of Shandong investors by investee industry (Outbound) (Deal amount) Deals of Shandong investors by investee industry (Outbound) (Deal volume) 40,000 38,847 37,460 35,000 Deal amount: RMB in million 30,000 5,000 0,000 15,000 10,000 5,000 11,001 11,395 4, Number of deals Source: ZeroIPO, Wind Information, and analysis Shandong Province M&A Review and Outlook

12 From 014 to 015, Shandong enterprises mainly pursued domestic targets. Key areas for targets included Beijing, as well as locations in Eastern and Southern China. However, in 016, overseas investments accounted for 73% of the total deal value, becoming a new growth engine for Shandong enterprise investments. Deals of Shandong investors by investee area (Deal amount) Deals of Shandong investors by investee area (Deal volume) 80,000 81, , Deal amount: RMB in million 60,000 50,000 40,000 30,000 0,000 10,000 1,500 1,093 10,574 Beijing ,154 1,961 Eastern China 5,478 4,60,935,939 Southern China 1,45 10,588 11,001,81 Others in China Overseas Number of deals Beijing Eastern China Southern China Others in China 4 1 Overseas Source: ZeroIPO, Wind Information, and analysis Shandong Province M&A Review and Outlook

13 M&A deals: Shandong enterprises as investees Shandong Province M&A Review and Outlook

14 There has been a continuous increase in M&A capital invested in Shandong enterprises in recent years. The total investment amount has reached RMB billion in 016, which was 4.5 times higher than in 014; Total number of deals set a new historical record, with 43 transactions in 015, a 65% increase from the prior year. More than 75% of these deals were investments in private enterprises. The amount of investments in SOEs also significantly increased in 016, including the acquisition of ST Jichaiby CNPC. Deals of Shandong investee from 014 to 016 (By investee type) Private SOE Foreign Private in volume SOE in volume Foreign in volume 160, , Deal amount: RMB in million 10, ,000 80,000 60,000 40,000 0, ,650 96, , ,605 53, , ,16 1 Number of deals Total deal volume: Source: ZeroIPO, Wind Information, and analysis Shandong Province M&A Review and Outlook

15 Investments in Shandong enterprises have been mainly focused on energy & mining, manufacturing, realestate and healthcare industries. Investments in energy & mining and manufacturing industries represent over 50% of the total investments. Investment value reached a historical peak in 016, led by deals in the manufacturing industry. Notable examples include CNPC capital s acquisition of ST Jichaifor RMB 75.5 billion, and Shan Steel Group s acquisition of Baldor gas for RMB16.1 billion. Deals of Shandong investee by investee industry (Deal amount) Deals of Shandong investee by investee industry (Deal volume) 10, , , Deal amount: RMB in million 80,000 60,000 40,000 4,143 0,000 15,469 13,765 1,311 4,759 19,86 6,959 10,59 6,195 6,7 9,310 3,40 4,417, ,007 1,917 Number of deals Source: ZeroIPO, Wind Information, and analysis Shandong Province M&A Review and Outlook

16 Investments in Shandong enterprises have been predominantly located in the Shandong Peninsula Blue Economic Zone and central Shandong region, which together accounted for 95% of the total investment value and over 80% of total deal number in 016. Deals of Shandong investee by investee area (Deal amount) Deals of Shandong investee by investee area (Deal volume) 10, ,667 5 Deal amount: RMB in million 100,000 80,000 60,000 40,000 0,000 6,775 1,83 15,91 Shandong Peninsula 40,067 4,035 Central Shandong 8,394 5,48 1,99 4,18 3,76 Southern Shandong Northern Shandong Number of deals Shandong Peninsula Central Shandong 6 Southern Shandong 3 3 Northern Shandong Source: ZeroIPO, Wind Information, and analysis Shandong Province M&A Review and Outlook

17 Outlook Shandong Province M&A Review and Outlook

18 Outlook for 017 We are still cautiously positive about the future mergers & acquisitions market in Shandong Province from both quantitative and qualitative perspectives. Following changes and rebalancing in global political and economical structures, there are increasing uncertainties both internationally and domestically. The rate of outbound acquisitions by PRC corporations gradually slowed down in the first quarter in 017. However, we expect that outbound acquisitions with strategic implications will still be encouraged. M&A transactions in Shandong are on course to continue to develop and integrate with existing resources, ultimately compensating for deficiencies in the local industry chain. SOE mixedownership restructuring and corporation restructuring are expected to become a popular focus for the future. TMT, education, tourism, medical and health industries are expected to enter a new growth cycle, while manufacturing are anticipated to continue playing a vital role in the local economy. Shandong Province M&A Review and Outlook

19 Our Suggestions Shandong Province M&A Review and Outlook

20 Our Suggestions Following the robust expansion of current business, corporations in Shandong Province can consider utlisingexisting M&A experience, and focusing on capital management to stimulate the economy, which will ultimately improve the pace of business development. Under the current circumstances, we recommend corporations set out a clear M&A objective and strategy. The M&A objective and strategy will play a crucial role in making optimal assessments for each transaction. Additionally, the focus of M&A feasibility assessments should go beyond financial, legal, valuation and tax perspectives, to also cover comprehensive plan integration as well as making a backup plan to account for potential risks that can arise when executing deals. When it comes to PRC corporations acquiring technology assets from overseas markets, external IP acquisition and internal IP generation should be treated as equally important. Sustainable development can only be achieved by improving R&D capabilities, which will enable corporations to achieve even more in the future. Greater international reach will be achieved through outbound acquisitions. Corporations should also continue to develop the domestic market and build up to becoming multinational by establishing an international presence with an appropriate share structure and attracting talented employees with a global view. Shandong Province M&A Review and Outlook

21 Data compilation methodology and disclaimer Included Deals Change in controlling interest as a result of acquisition of listed/nonlisted entities Equity investment in listed/nonlisted entities(minimum 5% equity interest) Business combination Leverage buyout, management buyout and management disposal Business privatisation Tender offer Splitoff of a whollyowned subsidiary when 100% sold via IPO Divestment of company, division or trading assets resulting in change of control at parent level Reverse takeovers Recapitalisation Joint venture buyout Joint venture Receivership or bankruptcy sales/auctions Tracking stock Balance sheet restructuring or internal restructuring Excluded Deals Property/real estate for individual properties Rumoured transactions Options granted to acquire an additional with less than 100% controlling interest Purchase of trademarks Land acquisition Equity placement in funds Mutual fund stake purchase Share buyback and share retirement of a nonprivatization transition Investments in greenfield operations Delisting process of a listed company Shandong Province M&A Review and Outlook

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