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2009 A Busy Year for Mergers and Acquisitions in China
Summary:

Markets page 18 issue 402
Translated by Liu Peng
Original article:
[Chinese]

Mergers and acquisitions (M&A) were poised to become one of the most important investment themes in China in 2009, according to recent research reports from domestic and foreign institutions.

The reports showed that M&A activities of firms administrated by the central government (central-owned enterprises) would become attractive topics in 2009, especially under the governmental policy supports.

Some analysts held that over 13 companies, which were listed in Shanghai and Shenzhen stock market, would likely have M&A opportunities.

Other market observers projected that at least 36 listed Chinese companies including major central-owned enterprises would likely play a important role in M&A activities in 2009.

The reports were released by the China International Capital Corporation (CICC), Hongyuan Securities, Southwest Securities, United Securities, Thompson Reuters and Price Waterhouse.

The CICC said that some industries, such as the non-ferrous metal sector, had hit bottom, and that they would generate more growth opportunities through M&A activity in the future.

"Economic downturns are the best time for launching M&A activities," said Sun Xiaoli, co-partner of H&J Consulting Company, a consulting firm in China's mainland.

The reports showed that by the end of 2008, some 564 listed companies including 93 central-owned enterprises took an interest in consolidation. They made up 35.9% of all firms listed in China's A-share market.

Some institutions believed that central-owned enterprises had especially bright prospects for M&A.

Since early last year, some 17 central-owned enterprises have been consolidated, their total number cut from 151 to 143.

A research report from United Securities showed the market values for listed subsidiaries of Chinese central-owned enterprises made up over 50% of total market value of the Shanghai and Shenzhen stock markets.

In 2009, China's State Council, the country's cabinet, would continue to require these central-owned enterprises to consolidate in order to expand their businesses and value chain.

"Nine industries in terms of mining, media, electrical power, real estate, transport and logistic, finance and insurance, steel and cement, machinery manufacturing and food and beverages will likely see active merger activities," said Wang Dali, an analyst of Southwest Securities, adding that cash-rich industry leaders would be best poised for such transactions.

He also elaborated on several companies like Shenhua Group, an energy and power provider, and Vanke, one of China's largest real estate developers, for investors to pay close attention to.

Hu Yue, an analyst of Shanghai Securities, told the EO that central-owned enterprises would try to restructure companies that had yet to break the top six in their industry.

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