By BLOOMBERG / Pic AFP
HONG KONG • Asian tycoons are looking to snap up assets pummelled by the deadly coronavirus at bargain prices, but they are also facing hurdles as more governments seek to deter foreign takeovers of local firms.
Over the past three months, top executives of companies based in mainland China, Hong Kong and Singapore have told investors that they are looking for acquisitions. They include Victor Li (picture), who took over Hong Kong’s CK Hutchison Holdings Ltd from his father Li Kashing two years ago, and billionaire Guo Guangchang, the founder of the acquisitive Chinese conglomerate, Fosun Group.
Major stock indexes in the US, Europe and Asia Pacific all plunged about 20% in the first quarter in their worst rout since the 2008 financial crisis, making retail chains to hotels and property developers attractive to suitors. Cash-rich conglomerates like Li’s CK Hutchison Group are in a position to invest when others struggle as they are built to defend against the bad times, said Jonathan Galli- gan, group deputy head of research at CLSA Ltd.
“This is a tremendous opportunity for any company with cash,” Galligan said. “If you look at what’s happened in the global market, right now cash is king.”
The junior Victor, 55, now chairman of CK Hutchison, CK Asset Holdings Ltd and CK Infrastructure Holdings Ltd, told analysts on March 19 that the group’s cashflow and balance sheet are strong and the impact of the virus offers “opportunities to look at new acquisitions.” He didn’t elaborate.
The market rout has come as Victor’s biggest test since his father passed on the baton in May 2018. The now-retired senior Li, 91, came to Hong Kong as a refugee, but went on to transform a plastic flower business into a ports-to-telecommunications empire spanning the world.
CK Hutchison, the main flagship whose stock has tumbled 23% this year, said it had HK$145 billion RM81.06 billion) of cash and liquid investments as of December. That is 3.6 times its short-term debt and 1.7 times its debt maturing over 2020 and 2021, according to S&P Global Ratings Inc. The group spent US$5.5 billion (RM 23.84 billion) last year acquiring assets including British pub operator Greene King plc, following about US$15.2 billion of purchases the previous year, according to data compiled by Bloomberg.
The chaos triggered by the disease is also posing another challenge for prospective buyers. Governments are pre-emptively trying to ward off predatory buying, with policymakers from Australia to Spain, Italy and Germany introducing or considering stricter rules to help shield strategically important domestic companies.
“For companies like Li’s, they depend very much on acquisitions to grow, and that could be a big challenge in the long term,” said Jackie Yan, an assistant professor in management and strategy at the University of Hong Kong.