Asia CEOs Look Past Europe Crisis for Takeovers, Citigroup Says

Feb. 23 (Bloomberg) -- Asian chief executive officers are preparing to accelerate acquisitions in Europe to take advantage of asset prices depressed by the continent’s sovereign debt crisis, according to Citigroup Inc. The number of deals the New York-based bank is working on involving Asian companies has jumped about 25 percent from a year ago, driven by clients seeking opportunities in Europe, Latin America, Africa and Canada, said Colin Banfield, Citigroup’s head of mergers and acquisitions for the Asia- Pacific region. “Europe features prominently on the radar screen of Asia’s emerging corporate champions, given the current attractive valuation levels,” Banfield said in an interview. “We’ve been trying to pair up where there are attractive assets in relatively weaker economies and to match these businesses up with Asian buyers.” Companies on the MSCI Asia Pacific Index held a combined $50 billion of cash at the end of last year, the most since 1995, according to data compiled by Bloomberg. Acquisitions in Europe by Asian companies swelled to a four-year high in 2011 as CEOs pounced on rivals weakened by the Euro-zone crisis. Citigroup ranked eighth in advising on M&A involving companies from the Asia Pacific region last year, up from 11th in 2010, data compiled by Bloomberg show. Excluding Japan, Australia and New Zealand, the bank topped the league table rankings. It helped Kirin Holdings Co. take over Brazilian beermaker Schincariol Participacoes e Representacoes in a deal completed in November. Valuations Diverge The prospect of a default by Greece has weighed on valuations in the Euro area, creating an opportunity for cash- rich Asian companies to buy assets on the cheap. Relative to their book value, European stocks sell for about one-third less than their U.S. counterparts, Bloomberg data show. Even as valuations diverge, uncertainty around how European governments manage their finances could deter Asian boards from making purchases in the region, Banfield said. “You’re not going to see Asia just being ring-fenced from what happens in the rest of the world,” he said. Citigroup advised Shandong Heavy Industry Group on its acquisition of Ferretti Group, the world’s largest luxury-yacht builder, a deal announced last month. China’s Sany Heavy Industry Co. used Bank of America Corp. for its takeover of German concrete-pump maker Putzmeister Holding GmbH. Sumitomo Mitsui Financial Group Inc.’s $7.3 billion purchase of Royal Bank of Scotland Group Plc’s aviation leasing unit was this year’s largest Asian acquisition in Europe. The biggest such deal of 2011 was also struck by a Japanese company, when Takeda Pharmaceutical Co. agreed to buy closely held Swiss drugmaker Nycomed for $9.1 billion. ‘Pull the Trigger’ Citigroup hired Banfield, 46, two years ago from Nomura Holdings Inc. as head of its Asian mergers advisory unit, a position that had been vacant for six months. Asia-to-Europe acquisitions are off to a strong start this year having reached $14 billion, compared with $7.3 billion for the same period of 2011, data compiled by Bloomberg show. For all of last year, $76 billion of such deals were announced, according to the data. Asian companies still have ample “firepower” for takeovers, Banfield said. “If you just spend long enough to get them ready and prepared for the opportunity, they would be prepared to pull the trigger,” he said. --Editors: Philip Lagerkranser, Mohammed Hadi To contact the reporter on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net