Asian companies eye acquisitions in EU

Declining asset prices of European firms in the wake of the EU debt crisis are prompting major Asian companies to look at possible acquisition or takeover targets in the European Union.

The downturn, weighing on stock performances, has brought down the share prices of many EU companies to an extent that they are starting to become attractive for Asian buyers, according to analysts.

For example, Charoen Pokphand (CP) Group, Thailand’s largest food and agribusiness group, is currently undertaking feasibility studies on European acquisition targets, according to comments by the company’s chairman Dhanin Chearavanont at a recent business forum in Bangkok.

The plans of CP Group, though not officially confirmed, include a possible investment in France’s retail group Carrefour and several food processing companies.

Another Thai group interested in benefitting from low share prices in Europe is national oil conglomerate PTT. According to PTT’s CEO and president Pailin Chuchottaworn, the oil major is on the lookout for attractive assets for purchase, calling the situation a “good opportunity” for Asian firms.

Last year, PTT already bought a majority stake in France’s Perstorp Holding, a major petrochemical player in Europe, and has also submitted a bid to acquire the London-listed oil and gas explortation company Cove Energy.

The two Thai conglomerates are not the only ones looking to Europe for bargains. Multinational banking major Citigroup said that the number of takeover deals it is working on in Europe involving Asian clients has jumped about 25 per cent so far in 2012 from a year ago.

Companies on the MSCI Asia Pacific Index held a combined $50 billion of cash at the end of 2011, the most since 1995, Bloomberg reported. Acquisitions in Europe by Asian companies grew to a four-year high in 2011.

Among the deals were the takeover of the world’s largest yacht builder Ferretti Group by Shandong Heavy Industry Group of China and the acquisition of German concrete pump maker Putzmeister Holding by China’s Sany Heavy Industry Corp. The biggest acqusitions so far were Sumitomo Mitsui Financial Group ’s $7.3 billion purchase of Royal Bank of Scotland’s aviation leasing unit, and the $9.1 billion acquisition of Swiss drugmaker Nycomed by Japan’s Takeda Pharmaceutical.

Meanwhile, Thai Prime Minister Yingluck Shinawatra said in her weekly talkshow on July 7 that investors and businesses already engaged in Europe should “not panic” abvout the ongoing debt crisis or hold back their investment plans. Such a panic “would only create more problems for the Thai economy,” Shinawatra said.

She added that the government was keeping a close watch on global economic conditions and was ready to come up with measures to deal with the impact of the financial crisis in Europe on Thailand.

However, while the EU debt crisis has already affected large economies such as China and India, Southeast Asian nations have not suffered to an extent that would harm their export volume significantly due to their comparably low export share to the EU, economists say.

On Thursday, the European Central Bank has cut interbank interest rates to a historic low of 0.75 per cent from one per cent, triggering another selloff at the global stock market and causing bonds prices to surge. The move could open the door for Asian banks to venture into the region.

The European economy is currently stagnating and could go through a five-year adjustment period, Swiss UBS Securities said in an analysis on July 6. Unlike in the US, the EU banking sector still shows no signs of a quick recovery. UBS expects the European Central Bank to cut interest rates again by 0.25 percentage points in September 2012.

The crisis of the world’s second largest economic bloc will slow world economic growth this year to three per cent, while Southeast Asian nations still can expect a growth between five and seven per cent, UBS said.