Impact on M&A Market
With China escalating economic retaliation on South Korea over the deployment of the U.S. Terminal High Altitude Area Defense (THAAD) system, Chinese capitals are scrapping their investment plans in South Korea. After the Chinese government has imposed a ban on South Korean products, such as Chinese sales of tour packages to Korea, entertainment contents, cosmetics and Lotte Mart, Chinese capitals are now withdrawing from the South Korean M&A market.
According to investment banking industry sources on March 27, a delegation of the China-based Agriculture and Commercial Bank Federation, which consists of Chinese banks related agriculture and commerce, delayed a visit to Korea. The group was planning to make a tour of the Financial Supervisory Service (FSC), Seoul City Hall and domestic major companies from the 27th.
The delegation consisting of major VIPs of 13 Chinese banks related agriculture and commerce was scheduled to visit the FSC and the National Agricultural Cooperative Federation on March 27, Seoul City Hall and Samsung Electronics’ Suwon plant on the 28th, Hyundai Motor’s Ulsan plant on the 29th, and the Jeju Provincial Government on the 30th. The official schedule of the group had been led by Korea Daesung Asset Management Co.
However, the group feel pressure visiting South Korea as the Chinese government is escalating retaliation against the nation over the THAAD system deployment. The Agriculture and Commercial Bank Federation signed a memorandum of understanding (MOU) with Korea Daesung Asset Management at the end of last year to jointly establish the nation’s first asset management venture company built with Chinese capital. The joint venture was supposed to be capitalized from South Korea and China with a ratio of 49 to 51. But, it is now unclear when to establish it.
A senior official from Korea Daesung Asset Management said, “Since the total assets of the banks reach hundreds of billions of won, it is disappointing that they delayed their visit to South Korea. Only when the Chinese government makes a more flexible move with the THAAD deployment, the investment schedule will be outlined again.”
China’s Fosun Group, which has been “a regular customer” in the South Korean M&A market, also delayed its visit to South Korea for investment in the South Korean market from earlier this month to April.
A senior official from the M&A industry said, “The senior officials from Fosun Group was planning to visit South Korea within this month to meet officials from accounting firms and officials related to domestic M&A deals and look into current major M&A deals in the South Korean market.”
The investment banking industry keeps an eye on the situation as Chinese capitals, which have been considered potential buyers of major domestic M&A deals, including financial companies, can be reluctant to make investment in the South Korean market due to the THAAD issue.
An official from the investment banking industry said, “Chinese capitals were the most potential buyers of financial M&A deals, which have implemented the two-track system of initial public offering (IPO) and sale including ING Life Insurance, HI Investment & Securities and eBEST Investment & Securities. However, it will be difficult for them to make investment in South Korea considering the current trend. Domestic M&A officials are also fretting about whether Chinese capitals, which have been a big player in the South Korean M&A market, are withdrawing from the nation.”