Assets on the Block: Who's Selling, Who's Buying in Asia

by Cesar Bacani, 08 August 2012

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topics:
Corporate Finance Management

tags:
due diligence M&A

The recent announcement that France’s Crédit Agricole is selling its remaining stake in its CLSA brokerage and investment unit to China’s CITIC Securities for US$947.1 million should not come as a surprise. As Europe’s economic crisis deepens, its banks and other companies are under pressure to dispose of their assets in Asia and elsewhere in order to buttress their businesses at home.

But do you know which European enterprise is selling next and what those assets might be? Simon Anam does. The Managing Director of mergermarket, Asia Pacific, is privy to what the specialist publisher’s extensive network of reporters, researchers and other resources worldwide are hearing on the ground.

Anam (pictured) spoke to CFO Innovation’s Cesar Bacani about some of the latest market intelligence regarding companies’ asset sales in Asia, M&A trends in the region and elsewhere, and other issues. Excerpts:

The Crédit Agricole-CITIC Securities deal is causing quite a stir. Are there other such asset sales brewing that CFOs should know about?

The press has just caught up with a situation that we’ve been covering for quite a few months now, which is that [US stockbrokerage] Piper Jaffray is perhaps selling its Hong Kong operations. They’ve been denying it, but we’ve been running stories about [China’s] GF Securities being interested in Piper Jaffray’s Hong Kong operations. The deal has not been announced yet, but Piper has finally come out and admitted that it is considering selling

This is within the financial services sector. These companies are feeling more of the pain than perhaps others. Although [their Asian units are] not struggling, and maybe the parent company in Europe and the US isn’t struggling per se, they just need to be focused on [their home market].

Are the Western parents selling at a discount?

I think valuations are becoming much more reasonable. Sellers are having to lower their expectations. Compared to 12 months ago, multiples are definitely coming down.

That’s reflected overall in the deal values. The total value of the deals that were done in the first half of this year is lower than in the first half of last year. There is a shrinking of deal sizes and what is being paid for these businesses.

It makes sense. There is a contraction across the board, and that’s why people have to lower their expectations. Markets are falling as well, valuations are down.

If you take the RBS-CIMB deal [where the Royal Bank of Scotland sold its Asia Pacific assets to Malaysian investment bank CIMB], that was talked about for quite a while [before a deal was struck in April].

You have deals that perhaps have been talked a year ago, two years ago, that are coming back now because of more realistic valuations. So if you look at the Whitehaven mining deal down in Australia, or the Billabong transaction – it’s great for [private equity company] TPG. If they leave it for a few more weeks, the price comes down a bit more.

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