DealZone

Keeping score: BRIC flotations

Initial public offerings (IPOs) of companies from the so-called BRIC nations — Brazil, Russia, India and China — enjoyed their best-ever start to the year, according to Thomson Reuters data:

• BRIC IPO volumes for the beginning of 2010 are at their largest level, in terms of both value and number of issues, for any January on record.

• Asian IPO issuance for January 2010 to date has reached a similar record, in terms of value, being the largest January on record.

• BRIC IPOs account for 76% of total global IPO activity for the year so far. This is up from 5.6% in January 2009.

• Materials tops the industry breakdown this month with 35% of the activity. Energy & Power and High Technology come 2nd & 3rd respectively.

The afternoon deal

china screensThe Chinese media sector may seem an unlikely place to make money, given the government’s approach to censorship, but  Reuters’ George Chen finds the private equity industry is hungry for pre-IPO companies in an area with big potential.  Read Chen’s story: China media sector: A magnet for private equity funds and the factbox about China’s media industry.

Related stories from Reuters include:

Baidu to launch online video site for premium content

China video site PPLive eyes profits in 2010

Microsoft pegs China search market as top priority

More background:

China says 5,394 arrested in Internet porn crackdown (Reuters)

China pushes global channels for media (China Daily)

China regrets over WTO appeal ruling on publication imports (China Daily)

Senior Chinese leader urges better media supervision (Xinhua)

Saab story ends

It’s official. General Motors will wind down operations at its loss-making Swedish unit Saab after an attempt to sell it to small Dutch luxury carmaker Spyker Cars failed. Things were already looking dire for a deal weeks ago. GM said early in the month it would consider offers for Saab until the end of the month and move to close the Swedish unit then if it appeared that it couldn’t be sold. Given it couldn’t save Saturn or Pontiac, Saab’s prospects for a GM-engineered solution had been slim at best.

GM said the move was not a bankruptcy or forced liquidation process. Saab will satisfy debts, it said, including supplier payments, and Saab operations will be wound down in an orderly fashion.

Niche luxury carmaker Koenigsegg was another last-ditch possibility that fell through for the Swedish automaker, which did manage to sell some assets to China’s BAIC. Saab has around 3,000 staff, and about the same number in other businesses are going to find the Scandinavian winter particularly cold this year.

Adelson splashes the pot in Asia

Sands China’s weak debut in Hong Kong - a first-day drop of 10 percent – was the fourth-worst launch on that market this year, but came as little shock to analysts who were betting against the Asian gambling play. Rival Wynn Macau is down 5 percent since listing in October.

Sands China’s $2.5 billion IPO wasn’t helped by the default tremors kicked off by Dubai, which has helped to expose a whole new area of risky bets in emerging markets.

“The fever for casino stocks is seen to be over now,” said Patrick Yiu, a director at CASH Asset Management. “Investors are worrying about the industry outlook, especially keen competition, when more casinos are ready for business.”

from Breakingviews:

Safe Volvo a risk bet for China’s Geely

Shares in Geely Automobile have risen some 40 percent in the past month partly on hopes the Chinese carmaker's parent company will buy Volvo. Ford has named Geely as preferred bidder for the Swedish marque. But on this occasion it could be better to travel hopefully than to arrive.

Buying Volvo would be a huge mouthful for Geely. If it goes ahead, Geely and founder Li Shufu will have to write Ford a cheque for $2 billion. But that's just for starters. Volvo lost $1.5 billion last year. Assuming it continued at the same rate during Geely's first year of ownership, the Chinese would pretty quickly be in for $3.5 billion.

By way of comparison, that is almost 20 percent more than Geely Automotive's enterprise value of just $3 billion. And it doesn't include any further investment Geely might make. The long-term plans being talked about in the media suggest the total could hit about $10 billion. Achieving an acceptable return on that would require a dramatic turnaround in Volvo's fortunes.

from Commentaries:

Is Goldman’s Chinese convertible really a taxi?

BRITAIN/The number of London's trademark black taxis booked and waiting outside the European headquarters of Goldman Sachs -- meters running -- was once used by some as a barometer of the health of London's investment banking business.

When times were good, the queue was long and it was impossible for anyone else in the vicinity to hail a cab. But when the fees dried up, or markets turned, the cabbies who'd been at Goldman's beck and call suddenly had to find new customers.

Last year, Goldman was reported to have stopped free taxis home for staff working in the office after 9pm, extending this to 10pm.

The Car Business: Self-loathing and Chinese Takeaways

Nobody hates cars as much as the car industry does these days. The business is crippling some of its biggest players and behold the dearth of industry names queuing up to buy other automakers.

Opel in Germany is being sold yet are Volkswagen, Porsche, BMW or Daimler anywhere to be found? Spot the empty parking lot.

Without the Chinese, auto sector M&A right now is about as exciting as a 1981 Yugo.

Truckin’ in China

It may be a fertile market, but Caterpillar and Navistar are hardly breaking new ground with plans to set up a joint venture in the People’s Republic. A source tells us the two U.S. machine makers are teaming up with China’s Jianghuai Automobile to set up a truck venture, a source said, hoping to gain a foothold in China’s 150 billion yuan ($22 billion) heavy truck market. But while the market may be fertile, it is a crowded space for foreign firms, with Daimler, MAN and others already tied-up with local partners.

Heavy truck sales in China rose 11.75 percent to 541,256 units in 2008, more than double the level in 2003, according to Nomura Securities, and are set to rise in the coming years on state pump-priming and infrastructure development.

While the money might be there, demand might not be for bourgeois trucks. “Foreign truck makers face a much bigger challenge in China comparatively because an Audi is a status symbol, while a Volvo truck can only push up trucking firms operating cost,” said Chen Qiaoning, an industry analyst with ABN AMRO TEDA Fund Management.

BAC to the Future

Now that the dark days of TARP force-feedings, congressional hearings and ill-conceived mergers are behind it, Bank of America is getting back to the business of expanding in the world’s most enduring pot of fabled gold, China. The bank sent a memo around saying it had rehired a China hand to head its corporate finance business there.

Wang Bing, who worked for Merrill Lynch between 2004 and 2008 in various management roles, including dealmaking in China, is back with Bank of America-Merrill Lynch as a managing director, according to the memo. On Thursday, we reported that Bank of America plans to set up a wholly owned subsidiary in China to bolster its corporate, investment banking and wealth management businesses.

In May, Bank of America sold $7.3 billion worth of shares in China Construction Bank. It needed the cash, so turning its back on such a long-term position made sense at the time. The news this week is hardly as dramatic, in scope or in value, but it is significant. If nothing else, it shows the bank trying to get back to the business of anticipating global growth. It will be interesting to see if the bank is any more effective at growing in China as a local business rather than as a partner with big, Beijing-favored China Construction Bank.

from Summit Notebook:

Expect action in Japanese M&A

After falling off a cliff at the start of this year as the global financial crisis gripped, mergers and acquisitions by Japanese companies overseas are likely to pick up again in the second half of this year, according to boutique Japanese M&A advisory firm Recof Corp.

There won't be a flood of deals, Recof President Hikari Imai says, but the ones there are, are likely to be chunky as Japanese companies expand their frontiers beyond domestic markets where growth prospects are limited.

Geographically the focus is likely to be Asia -- China, India in particular and possibly the Philippines or Australia. And the types of companies looking abroad will broaden as well, Imai told the Reuters Japan Investment Summit.