Riding the wave of big bargain buy-ups

Charged up

Another example of a European business enjoying great growth after receiving fresh injection of capital from its new Chinese owners is Dynex Electronics, a semiconductor manufacturer based in Lincoln, England.

In 2008, Zhuzhou CSR Times Electric acquired a 75 percent stake in Dynex and has since helped the British company build a 12 million pound ($19 million) new R&D center to focus on developing insulated-gate bipolar transistor technology.

Dynex's R&D team also increased from 12 to about 40, including those from the Zhuzhou company on secondment.

Dynex has also helped Zhuzhou CSR to build a new factory in China, which specializes in producing low-voltage IGBT semiconductors, while production of high voltage IGBT semiconductors remains with Dynex in Lincoln.

"The strategy Zhuzhou CSR Times Electric discussed with us is to retain our operations here in Lincoln," says Paul Taylor, who has been CEO of Dynex since 2004.

"They wanted us to grow. Particularly, they want to invest in technologies and facilities we have here, so we would be able to become a leader in technology."

Dynex's team in Lincoln has grown from fewer than 250 before the acquisition to about 330 now. The company's sales in China have also grown as Zhuzhou CSR became a distributor for Dynex's products for the Chinese market since the acquisition, Taylor says.

The European food and beverage industry has also proved attractive to Chinese companies.

In June last year, Chinese food group Bright Food Co Ltd bought a 70 percent stake in Bordeaux wine exporter Diva to gain a foothold in the French wine-making region. While Chinese businesses and individuals have shown interest in buying wine-growing properties, it was the first time a Chinese firm had made a move into French wine trading.

"This will give Diva a better knowledge of the Chinese market and will boost the firm's means to sell its products," a spokeswoman for the French merchant said when the deal was announced, adding Diva sold a wide range of wine qualities, including grand crus, the designation for classified vintage wines of the finest quality. Of the 11,000 chateaus along the Garonne River in Bordeaux, 15 to 20 have been sold to Chinese investors since 2008 and another 30 could soon change hands.

Analysts say the trend will intensify, even though China is among the world's 10 largest domestic wine producers.

Bright Food also completed its purchase of a majority stake in British Weetabix Food Co last year, marking the largest overseas acquisition that a Chinese company has made in the food industry.

As part of the deal, Bright Food paid nearly 700 million pounds ($1.12 billion) to acquire a 60 percent stake in Weetabix and also agreed to cover 500 million pounds of Weetabix's debt. The remaining 40 percent of Weetabix's shares continue to be held by the private equity group Lion Capital Management Group.

"We are delighted about our partnership with Bright Food," says Giles Turrell, chief executive of Weetabix. "We are confident that, with Bright Food's support, we will be able to significantly strengthen our market position and expand our business internationally."

Shadbolt at Vermilion says examples of Chinese companies successfully growing their acquired targets' local production and employment numbers will serve to reduce the negative sentiment in the minds of some European businesses and the general public.

Experts expect that the M&A trend will continue, as Chinese companies, finding growth slowing at home, will continue to look abroad for know-how and strong brands.

"At the end of the last century, China was all about cost reduction for Western companies. Chinese companies adopted the same rationale when buying overseas, sometimes leading to redundancies," Shadbolt says.

"Now China is all about growth and cross-border M&A is seldom predicated on redundancy programs. Therefore we expect this sort of fear will gradually subside as more successful growth-driven deals are completed."

Wang Mengzhen contributed to this story.