Business World

Thursday 27 October 2016

China flexes muscles with takeover probes involving US giants

Adam Jourdan and Michelle Price

Published 03/09/2016 | 02:30

DreamWorks is the maker of the hit ‘Kung Fu Panda’ franchise
DreamWorks is the maker of the hit ‘Kung Fu Panda’ franchise

The Chinese government said yesterday it was investigating two high-profile takeover proposals involving US companies, the latest sign of its growing influence on whether deals are approved - even those appearing to have little impact in China.

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The Ministry of Commerce said at a briefing it was probing ride-hailing giant Didi Chuxing's planned acquisition of US rival Uber Technologies's China unit and Comcast Corp's purchase of movie studio DreamWorks Animation.

The scrutiny, announced the day before world leaders descend on China's eastern city of Hangzhou for a meeting of the G20, underscores the ministry's increasingly tough stance on companies that strike deals without seeking its approval.

There had not been a filing for the Didi-Uber deal, the ministry said last month.

Comcast already said it had completed the deal for DreamWorks, which may indicate it didn't think it needed to wait for Chinese approval.

The ministry requires companies to notify it of transactions before they close if those merging have combined global turnover in the previous year exceeding 10 billion yuan (€1.34bn) or their combined China income exceeds two billion yuan ($300m).

Didi said its deal did not trigger these thresholds, while lawyers said they were surprised that the DreamWorks deal was being probed given its small China footprint.

"With the DreamWorks-Comcast deal I was kind of surprised," said Wendy Yan, Shanghai-based partner at Faegre Baker Daniels. The ministry said it had launched the investigation into the takeover following unspecified complaints that the combination of Comcast, one of the largest US cable and broadcasting groups, with the movie studio could hurt competition in the Chinese market.

"I'd be interested to know who made such complaints and how exactly the (Comcast-Dreamworks) merger would affect the China market because they are not in a dominant position," added Yan.

A representative for Comcast declined to comment on the Chinese probe.

Comcast, owner of NBCUniversal, said in April it would buy DreamWorks, the producer of the 'Kung Fu Panda' and 'Shrek' franchises, for $3.8bn.

DreamWorks was one of the first Hollywood names to open a production studio in China and NBCUniversal in 2014 announced plans to open a $3.3bn Universal theme park in Beijing.

China's film market, the world's second largest, is a magnet for movie producers looking to tap the country's 1.4 billion people, even though there are signs that stellar box office growth may be starting to slow.

Comcast announced the completion of the DreamWorks deal last week. The ministry has the power to fine companies it believes should have sought clearance, and can also force them to sell assets to get approval, or even to unwind transactions

Lawyers said that the Didi deal to buy Uber's China unit had caused a stir among local consumers and rivals.

Consumer groups and rivals have warned that fares could rise steeply if the two companies join forces. (Reuters)

Irish Independent

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