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Jan M&A spike due to recovery, policy help

By Zhao Qian (Global Times)

08:20, February 01, 2013

Mergers and acquisitions (M&A) by Chinese companies spiraled up to an 11-month high in January thanks to the domestic economic recovery and supportive government policies, according to a report e-mailed to the Global Times Thursday by financial consultancy China Venture.

A total of 151 M&A deals were completed and 33 more were initiated last month, with their total value reaching $57.5 billion, a 316 percent month-on-month rise, the report said.

Food and beverage, energy and mining, and the manufacturing industries led the market to prosperity, according to the report.

The biggest deal last month was conducted by Huafeng Group Holdings, a Hong Kong listed textile company, which spent $3.94 billion to acquire 100 percent of equity rights in tea production company Fujian Natural Tea Technology Co.

Of the M&A deals, 90.07 percent were conducted domestically by Chinese companies, with their total value reaching $6.69 billion, while 8.51 percent were concluded overseas by Chinese firms and only 0.35 percent were initiated by foreign companies, the report noted.

"The boom of Chinese companies' domestic M&A last month was mainly because of better macroeconomic performance and government support," said Ji Li, an analyst at the Beijing-based consultancy Zero2IPO.

To support domestic activity, policymakers released a guideline on January 22 offering M&A policy support including preferential tax policies and subsidies.

The guideline also set up working targets for M&A in nine industries including automobiles, steel and cement.

Dragged down by sluggish global economies and the slowdown of domestic economic growth, Chinese companies saw the total number of M&A deals last year decline by 21 percent year-on-year, while the total M&A transaction value declined by 28 percent, according to a report released Wednesday by PricewaterhouseCoopers.

But Ji said the number of M&A deals this year will trend upward, especially among larger listed companies and in industries that have overcapacity issues, such as solar industry.

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