Chinese companies on a global shopping spree

The big news in the U.S. is the recent purchase of the AMC movie chain for $2.6 billion (photo), but acquisitions have been made in South America and Europe as well. First-quarter deals involving Chinese buyers rose 118 percent, to $21.4 billion, according to a study. From DealBook:

While many observers point to the activity as evidence of state-backed capitalism or Beijing's mercantilist approach to overseas acquisitions, researchers at the Rhodium Group, a consultancy based in New York, wrote in a separate report released on Thursday that commercial considerations were the main drivers of corporate China's foray into Europe. "Direct political guidance has played a very minor role in Chinese investment in Europe thus far," the Rhodium analysts Thilo Hanemann and Daniel H. Rosen wrote. "China's industrial policies and encouragement (via offered low-interest capital) of going abroad are impacting investment decisions, but they are not the primary reasons firms from China are appraising opportunities in the European Union."

The AMC purchase is a big deal, not only because it would be China's largest corporate takeover of a U.S. company, but because AMC is so tied to the American consumer. Until recently, the Chinese would buy U.S. companies that were in industries like transportation, heavy manufacturing, natural resources - businesses that don't get all that much notice. From this week's Business Update (available on podcast as Business Update with Mark Lacter)

Julian: Does China want to produce?

Lacter: Not so far, according to the chief executive of AMC, but this is a large company and who knows what might be in the offing. What this deal does show is the willingness of Chinese executives to think beyond the short term. AMC lost money in each of the last two years, and it's been under pressure to pay off several private equity firms that owned the company. Wanda was willing to pay $2.6 billion for the chain, and appears ready to put more money into the operation. And the head of Wanda says he wants to control 20 percent of the global theater market by 2020. So there's a lot of ambition there.

Julian: Is this only about AMC?

Lacter: Not at all. What the AMC deal does is encourage other Chinese businesspeople to make purchases in the United States. So far, they own a very small percentage of global assets, but they certainly have the financing. And if all this sounds a bit familiar, Steve, just remember that in the late 80s Japanese companies invested heavily in the U.S. - mostly in real estate, but also in a couple of the Hollywood studios. Then when the economy hit a soft patch, they wound up selling many of those assets at a loss. So the question is whether the Chinese investors are really in this for the long haul - and what kinds of owners they turn out to be.