On M&A Deals

Recently we have a bit of a shocker news from China-- major conglomerates like the Wanda Group, HNA, etc are being queried by the China Banking Regulatory Committee (CBRC) regarding their loans. I know very little about China, and most investor in Singapore are heavily dissuaded (with good intentions of course) from investing in s-chips. For the uninitiated, s-chip is the term given to companies listed in Singapore but actually based and managed by the Chinese.

To summarise, the CBRC is probably concern with the amount of M&A deals going around recently from these conglomerates. More specifically, they want to know the source of these loans.

The first time I have heard of HNA group was due to its plans to acquire CWT Limited, a local logistic company. After reading the fine book by Joe Ponzio (F Wall Street), I began investigating the balance sheet of both HNA and CWT.

Both have so-so balance sheets. More worryingly, I wonder how HNA group could possibly fund this acquisition from its own pocket. Some research and helpful forum posters pointed out that they depended on banks and JVs to do so. A bit of googling revealed that these companies have been on a spree of acquiring companies. There are also politicking going on behind the scenes, though most of these info are from the grapevine.

Unlike the last M&A ARA deal, the CWT deal didn't feel all that safe to me. I always looked at M&A deals as low-risk-definite-returns, and will bet a sizeable amount of my portfolio into it. To stress the point, I can assure you that it is not no risk-- anything can happened at the last minute. It isn't over until it is over (or voted).

Along with the recent inverse bond yield alert, I think it isn't prudent to bet on these deals. I glad I have stayed away.
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As of now, there are 3 "deals" going on in SGX.
- CWT
- M1 (rumoured deal. Gosh God help these investors who only just bought recently)
- GLP (another rumoured deal that can go south very very quickly).

Neither of them look safe enough for investors.

Update on 18-Jan-2018
GLP's deal concluded successfully.
MI went down from 2.1 to 1.7 after its "strategic review" between substantial shareholders concluded that a sale is not in the interest of the shareholders.
The CWT deal was seal successfully after a few dramatic sell-downs (big enough to frighten some arbitrageurs)