Chinese buyers’ ‘bottom fishing’ tour of North America postponed due to H1N1 spread

This article is provided to FT.com readers by mergermarket—a news service focused on providing actionable, origination intelligence to M&A professionals. www.mergermarket.com
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With more and more H1N1 sufferers and suspects found and reported in China, Beijing has upgraded its vigilance level and actions, mergermarket reports. And as a result, the scheduled Chinese buyers’ ”bottom fishing” tour to hunt for distressed targets in North America has been postponed from mid-June to September, according to a notice from the state organizer. The notice cited the spread of H1N1 flu as the only reason for the postponement decision.

An organizer source revealed up to now more than 600 Chinese entrepreneurs and provincial governors have submitted applications to participate in the delegation. “Many companies showed strong interests in entering the North American market at this downturn period. We also proceeded quite well in organizing the trip with many detailed arrangements finalized already,” the source said, adding that it was not until last weekend that the government decided to postpone the trip.

According to the original schedule, the Chinese delegation, probably led by Hu Jintao or Premier Wen Jiabao, would start the US visit in San Francisco and Los Angeles. They would then meet with members of the American Chamber of Commerce at a Sino-US economic and trade cooperation forum in Washington, DC. The governors would attend a Sino-American Governors’ Round-Table in Utah where entrepreneurs would also participate in a Sino-American Pertinent Enterprise Conference. In Toronto, they will meet face-to-face with members of the Canadian business community.

”The trip is just delayed to September, not canceled. The government’s policy of encouraging Chinese companies doing outbound acquisitions will not change,” the source said. An official who is close to Chinese top investment regulator the National Development and Reform Commission [NDRC] revealed that the Chinese government is inclined to transfer its huge foreign exchange reserve into material assets by encouraging Chinese companies making outbound buys. Compared with virtual financial assets like bonds and notes, material assets including companies are more reliable to reserve the country’s wealth, the official elaborated. He cited a newly released policy which loosens the control of foreign exchange regulation and encourages companies using foreign exchange to make outbound investments as a signal of this strategy trend.

The trip’s postponement comes as Chinalco’s attempt to buy Rio Tinto was rebuffed by shareholders, leading to speculation that ongoing failures to make large high profile transactions may cause the country to reorient its acquisition strategy. However, a trip such as the one planned in the US would fit better with expectations that the country will focus more on smaller, low-profile deals.

According to a previous report by this news service, the tour, organized by the Ministry of Commerce in conjunction with the China Council for the Promotion of International Trade [CCPIT], is scheduled to visit the US from 10-23 June. The visitors will include business leaders from the petrochemical, heavy machinery, automotive, energy, metal mining, IT telecommunications, media, real estate, education, food, furniture and consumer goods sectors.

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