Chinese Acquisitions

of German Companies

 
 

Vocabulary

mood	acquire	commercial
invest	firm (2)	close deals
sector	buyout	record (3)
range	plant (3)	skyscraper
wide	draw up	automation
focus	flagship	transition
panel	strategy	relinquish
rank	support	household appliances
rubber	portfolio	leap/leapt/leapt
funds	abroad	in terms of
allow	private	target (2)
district	state (2)	manufacture
oblige	venture	joint-venture
joint	partner	take over
sector	forbidden	rare-earths
strict	assume	injection (2)
based	minimal	know-how
mold	issue (2)	mass production
tire (2)	share (2)	price-sensitive
brisk	sensitive	subject to
affairs	likelihood	semiconductor
dispute	escalate	misgiving
among	lucrative	consortium

 
 
 
 
 
 
 
 
 
 
 

Video

 

 
 
 
 

Transcript

It’s busy in Frankfurt’s commercial district. The stores are doing brisk business. And this man’s clients are also in a spending mood.

Hui Zhao’s law firm closes deals for Chinese investors in buying German companies. He told us why they’ve been shopping so much this year: ten billion euros in the first half of 2016 alone — a new record.

Hui Zhao, Lawyer: “Many different sectors of industry are very interesting for Chinese investors. There have been a large number of buyouts this year at top dollar in areas like automation, plant engineering and robot technology.”

Hui Zhao and his 60 colleagues draw up contracts in a skyscraper in Germany’s banking capital.

In ten years, China wants to have a leading position in a wide range of sectors. The government has issued calls to keep funding at home, and focus investment abroad: state and private investors are targeting big names, and even global leaders, like Kuka, a German manufacturer of industrial robots.

In 2016, the Chinese group, Midea, bought 95% of Kuka’s shares for €4.5 billion. This German flagship company was relinquished to the Chinese.

But where did the money come from?

Hui Zhao, Lawyer: “It’s all part of the Chinese government’s strategy. Midea probably got support from the Chinese government. We don’t know. But we assume so.”

Midea now ranks among the top global groups.

Hui Zhao: “This is also a huge leap forward in terms of Midea’s portfolio. Until now, they only made household appliances like refrigerators and microwaves.

Now they are suddenly dealing in robotics.”

Chinese state-owned groups are buying privately owned German companies.

German companies, however, aren’t allowed to acquire Chinese companies. They’re usually obliged to create a joint-venture with the Chinese partner, certainly in the automobile and insurance sectors. And taking over companies related to rare-earth products or armaments is strictly forbidden.

Krauss Maffei is a Munich-based company and the global in injection-molding machines. This year, a buyer from Asia paid around a billion Euros to acquire the firm. The machines here make rubber tires and plastic panels for the automobile industry, as well as plastic cups.

The quality is always very high. Of the 45 hundred (4,500) employees, 800 are engineers. This know-how is important to the Chinese, says Krauss Maffei’s managing director.

Frank Stieler, Krauss Maffei Group CEO: “China is moving away from cheap mass production towards high quality and price-sensitive products. And it needs help to make this transition because they don’t have the right expertise.

A company like Krauss Maffei is a premium manufacturer, so it can help the Chinese with the change of products.”

Back in Frankfurt. The sale of another market leader Extron, to half state-owned Chinese consortium was recently halted by the German Ministry for Economic Affairs and US President, Barrack Obama.

The reason?

Extron has a factory in the US, and it manufactures machines that produce semiconductors. The Chinese could use this technology for military purposes.

Trade between China and the West is often subject to uncertainty.

Hui Zhao, Lawyer: “Imagine if Kuka had been acquired by an American company or Krauss Maffei had been bought by a French company. The likelihood of anyone in Germany having misgivings about it would have been very minimal.

And for him, the lucrative contract business as an attorney has only just begun, because he doesn’t believe that the Germans will allow the dispute to escalate.

The sale of their products in China is simply too important.

*     *     *     *     *     *     *

Questions

1. Hui Zhao is a Chinese businessman and investor. True or false?

2. Have Chinese purchases and acquisitions of German companies been increasing, decreasing or remaining the same?

3. Chinese investors tend to target high-tech enterprises. Is this right or wrong? Why are they interested in high-tech industries? What is a prime example?

4. Does Hui Zhao work alone, or is he part of a company or organization? Where is his base of operation?

5. The funding is entirely from private investors and sources. Is this correct or incorrect?

6. Is this a bilateral investment? Is it “fair”?

7. Have all international transactions gone ahead as planned? Why have some been rejected?

8. Will there be increased restrictions on Chinese acquisitions of German companies? Why won’t there be greater restrictions?

 
 

A. Are all companies in your city and country domestically owned and operated? What are examples of foreign own companies?

B. Has the situation changed over time? How do locals feel about this? Why has this been happening?

C. Do firms from your country own and operate companies abroad? Give examples. How do the locals feel about this? Why has this taken place?

D. Is there increasing business, trade and transactions with China?

E. What will happen in the future?