Asian Equities Eye on U.S. Businesses through M&A deals

By Joyce Yu

Philadelphia, PA–The Chinese sovereign wealth fund is reported to team up with Goldman Sachs to invest at least $5 billion in mostly U.S. manufacturing.

Sources told CNN that China Investment Corp. or CIC asked Goldman Sachs to partner with it on the private-equity fund, which will deploy money into manufacturing, industrial, consumer, healthcare and other U.S. businesses. It’s not clear how much each firm will contribute to the fund and both parties have yet commented on this.

News of the partnership, first reported by The Wall Street Journal, comes as Goldman Sachs CEO Lloyd Blankfein and other American business leaders join Trump this week in China and other Asian nations. The partnership between CIC and Goldman could be unveiled this week while President Trump is in Beijing for a series of meetings with Chinese President Xi Jinping, according to CNN.

Holding $813 billion of assets as at the end of 2016, CIC is one of the largest sovereign wealth funds in the world. By working with Goldman Sachs, China could be hoping for an easier path to secure regulatory approval to invest in U.S. businesses, according to the same report. The report further notes some previous Chinese deals were rejected by the U.S. Committee on Foreign Investments due to national security concerns. In September, the Trump administration prevented the takeover of an American chip maker by a private-equity firm with ties to China.

Merger and acquisition deals are picking up as the global economy continues to improve, and Asian companies are notable in recent prominent deal talks.

In a quarterly filing with the Securities and Exchange Commission, Snap, the parent of social messaging snapchat disclosed that Chinese messaging giant Tencent has increased its stake in the former to roughly 12%.

News of the investment comes one day after the company posted a huge revenue miss for the third quarter which led its shares to plunge nearly 20%. The stock erased all of the losses to trade slightly higher on the Tencent filing before losing momentum. Tencent invested in Snap in 2012 and 2013 in private rounds, before purchasing more shares of Snap on the open market over the last quarter. Earlier this year, Tencent bought a 5% stake in Tesla.

Another deal hitting the headlines is the proposed acquisition of Qualcomm by Singapore headquartered semiconductor manufacturer Broadcom, which would be the largest technology deal on record. If Broadcom’s $103 billion bid for Qualcomm succeeds, it could set up a battle with Intel Corp for dominance in the production of the next generation of communications chips, which will play a vital role in so-called connected cars.

Qualcomm long was the dominant communications chip maker for mobile phones, although computer chip maker Intel has begun muscling into the space. Chip makers are scrambling to create new mobile networks, the so-called fifth generation, which will link phones as well as cars, drones and even industrial devices.

Intel has bought itself into relationships with autonomous car developers through its acquisition of vision system maker Mobileye. Qualcomm itself is trying to buy NXP Semiconductors, a maker of automotive chips. If Broadcom pulls off both deals, “its market position in some areas could be dominant, said Cowen and Co analyst Karl Ackerman,” said Cowen and Co analyst Karl Ackerman.