CROSS-BORDER INVESTMENTS ELECTIVE COURSE Rainer kulm Mac Planck Institute for Comparative and International private Law-Hamburg culms(@mpipriv de 1. Cross-Border Investments -- Patterns M & a typology, Negotiation, Company Law Aspects 23456 M a and Ancillary Contracts -Joint Ventures Acquisition Finance EU Takeover and Competition Laws Investment Controls-Summary CESLELECTIVE-APRIL2016
CESL ELECTIVE - APRIL 2016 1 CROSS-BORDER INVESTMENTS - ELECTIVE COURSE - Rainer Kulms Max Planck Institute for Comparative and International Private Law – Hamburg kulms@mpipriv.de 1. Cross-Border Investments – Statistics – Patterns 2. M & A Typology, Negotiation, Company Law Aspects 3. M & A and Ancillary Contracts – Joint Ventures 4. Acquisition Finance 5. EU Takeover and Competition Laws 6. Investment Controls - Summary
Statistics: Chinese Outbound fdi flows 2002-2014 UsD billion. annual 140 Financial outbound fdi flows Non-financial outbound FDi flows 100 2002 2003 2006 2007 2009 20102011 2012 20132014 Source: Ministry of Commerce (MOFCOM):"Projections by MOFCOM officials. Source: rhodium Group 2016/MOFCOM Statistics CESLELECTIVE-APRIL2016
CESL ELECTIVE - APRIL 2016 2 Statistics: Chinese Outbound FDI Flows 2002 – 2014 Source: Rhodium Group 2016/MOFCOM Statistics
Completed Chinese Outbound Cross Border M&A USD million, percent share of global total 70.000 10% Aggregate Value of Completed Chinese Outbound Cross Border M&A Deals(Left Axis 9% - Chinese Share in Total Global Cross Border m&A Value(Right Axis 40.000 5% 30.000 3% 2% 10.000 1% 2004 2005 2006 2007 2008200920102011 2012 2013 2014 Source: Bloomberg, Thomson, Rhodium Group, includes disclosed value of all completed M&a transactions by ultimately Chinese-owned firms irrespective of the size of the resulting stake, aggregated by date of completion CESLELECTIVE-APRIL2016
CESL ELECTIVE - APRIL 2016 3 Completed Chinese Outbound Cross Border M & A
Completed Chinese Cross Border M&a (Industry of Target) Aggregate value, USD million 70.000 60000 Others 50000 Real Estate Ent. 40000 Hospitality High Tech 30000 Industrials 20000 Financial 10000 Retail Energy Power Materials 20042005200620072008200920102011201220132014 Source: Bloomberg, Thomson, Rhodium Group; includes disclosed value of all completed M&A transactions by ultimately Chinese-owned firms irrespective of the size of the resulting stake, aggregated by date of completion CESLELECTIVE-APRIL2016
CESL ELECTIVE - APRIL 2016 4 Completed Chinese Cross Border M&A (Industry of Target) Source: European Chamber of Commerce in China (2013)
Completed chinese Cross Border m&A (Region of Target Aggregate value, USD million 70.000 60000 50000 Others 40.000 Japan Canada 30000 20.000 EU 28 10.000 United States 200420052006200720082009201020112012201320142015 Source: Bloomberg, Thomson, Rhodium Group; includes disclosed value of all completed m&a transactions by ultimately Chinese-owned firms irrespective of the size of the resulting stake, aggregated by date of completion CESLELECTIVE-APRIL2016
CESL ELECTIVE - APRIL 2016 5 Completed Chinese Cross Border M&A (Region of Target) Source: European Chamber of Commerce in China (2013)
Chinese ofdi in the eu of 28 ( Greenfield and M&a) FInan 0-500 2000-2014(Rhodium/Mercator) 102 500-2.000 2000-5.000 EUR million Sweden 5.000-10.000 1.522 LIthuania reland 12212 2.997 Poland 453 Germar 6.872 Czech Rep 138 Slovakia Austria 436 5907 1.89 Romanla 733 4.202 Portugal 5.138 CESLELECTIVE-APRIL2016
CESL ELECTIVE - APRIL 2016 6 Chinese OFDI in the EU of 28 (Greenfield and M&A) Source: European Chamber of Commerce in China (2013) 2000 – 2014 (Rhodium/Mercator)
Chinese Outbound Foreign Investments(M&a)< planning Closed Transactions 2015 up by 16 from 2014 the Deal - more diverse mix of assets(with a focus on energy and advanced technology) greater two-way traffic(cf. income from overseas subsidiaries) Chinese state-owned investors-private investors Distinguish target countries of Chinese OFD Country ratings aprovide capital to sustain developments and provide alternatives to resources abundant countries to maximise bene benefits Replacement effects?( China's OFDIOECD countries'OFDD uno evidence that a rise of chinas ofdi in oi-abundant countries will cause a significant in oecd countries'ofdi cause a 5.32% in the OECD countries oF/ hese oFDi will High-income host countries: 10% rise in Chi CESLELECTIVE-APRIL2016
CESL ELECTIVE - APRIL 2016 7 Chinese Outbound Foreign Investments (M & A) ►Closed Transactions 2015 up by 16 % from 2014 ▪more diverse mix of assets (with a focus on energy and advanced technology) ▪greater two-way traffic (cf. income from overseas subsidiaries) ▪Chinese state-owned investors – private investors ►Distinguish target countries of Chinese OFDI ▪provide capital to sustain developments and provide alternatives to resources abundant countries to maximise bene benefits ►Replacement effects? (China’s OFDI/OECD countries’ OFDI) ▪no evidence that a rise of China’s OFDI in oil-abundant countries will cause a significant in OECD countries’ OFDI ▪High-income host countries: 10% rise in Chinese OFDI will cause a 5.32% in the OECD countries’ OFDI Planning the Deal Country ratings
Regulatory obstacles Planning the deal Q: Did you encounter any of the following regulatory obstacles when investing in the EU? N=71 of respondents 0%2%4%6%8%10%12%14%16%18%20% Government approvals at local level 18% Role of EU law compared to national country 15% la Government approvals at EU level Government approvals at national level National security concerns Access to incentives Source: European Chamber of Commerce in China(2013) CESLELECTIVE-APRIL2016 8
CESL ELECTIVE - APRIL 2016 8 Regulatory Obstacles Source: European Chamber of Commerce in China (2013) Planning the Deal
M &a: Chem China- Syngenta(Switzerland) CASE 1 Friendly Takeover Syngenta Switzerland Offer LUS subsidiaries (incl, research) S 43bn/$465 per share China national Latin america 30% Chemical corp. North America 25 (Chem China) Yet a Europe, asia. Project! Middle east 31% Asia pacific 14% State-owned Assets Supervision and US Investment Controls(CFIUs) Administration ■ Antitrust issues Commission-SASAC Takeover Law(Friendly/Hostile) CESLELECTIVE-APRIL2016 9
CESL ELECTIVE - APRIL 2016 9 M & A : ChemChina – Syngenta (Switzerland) CASE 1 China National Chemical Corp. (ChemChina) State-owned Assets Supervision and Administration Commission-SASAC Syngenta Switzerland US subsidiaries (incl. research) Latin America 30% North America 25% Europe, Asia, Middle East 31% Asia Pacific 14% Friendly Takeover Offer $ 43bn/$ 465 per share ▪US Investment Controls (CFIUS) ▪Antitrust Issues ▪Takeover Law (Friendly/Hostile) Yet a Project!
M& A: Chem China- Makhteshim Agan(Adama) CASE 2 China National Agrochemical(60% MAI Israel(Adama) Corp(CNAC) (Non-)agrochemical products Raw materials (DELIST artie 40 China National S2. 4bn Chemical Corp (ChemChina) nareholder Agmts Koor Industries Tel aviv Antitrust? State-owned Assets Post-acquisition plans Supervision and Adama iPo in the us? Administration .Adama acquires chinese companies Commission-SASAC .Adama exclusive distributor CESLELECTIVE-APRIL2016 10
CESL ELECTIVE - APRIL 2016 10 M & A: ChemChina – Makhteshim Agan (Adama) CASE 2 China National Chemical Corp. (ChemChina) China National Agrochemical Corp. (CNAC) State-owned Assets Supervision and Administration Commission-SASAC 60% MAI Israel (Adama) (Non-)agrochemical products Raw materials (DELIST!) Koor Industries Tel Aviv 40% Post-acquisition plans ▪Adama IPO in the US? ▪Adama acquires Chinese companies ▪Adama exclusive distributor Antitrust? $2.4bn