Chanticleer
More thawing needed to tempt Aussie bankers to Shanghai’s bars
A decade ago, a bankers’ roadshow wasn’t complete without a stop in Beijing and sometimes even Shanghai. They were the good old days of restaurants in high places.
All this thawing of Australia-China relations has investment bankers and lawyers thinking about Shanghai fine dining, and their once mandatory boardroom pitches full of dozens of company officials in China.
Only a decade ago, investment bankers asked to sell an Australian company or asset of size – a stake in a NSW electricity distributor, a toll road, wind farm, hospital operator – would head offshore, trying to drum up interest from buyers in Asia, the Middle East, London, the United States and sometimes Canada.
Bankers are watching political relations between China and Australia thaw, but say it is too early to count on an increase in Chinese investment just yet. David Rowe
There were a few ways to do it, depending on how much time bankers wanted to spend on the road. Sometimes they would do Asia – Singapore, Hong Kong, China – in three or four days, and then the rest of the world. Sometimes Asia would be the final stop. Other times they would break it in half.
China was a mandatory stop, particularly for anything infrastructure-related. Beijing was the primary target, while some snuck in a stop in Shanghai to see The Bund and hang out at Flair on the 58th floor of the Ritz-Carlton. They would drink ridiculously priced Australian wine in the open air, among the Pudong district’s towering skyscrapers. Jacob’s Creek was on the list.
Bankers would return from their roadshows and run auctions. Sometimes they managed to hook a serious Chinese bidder, other times not. There was often a rumour of an unidentified Chinese bidder – an unexpected party, or one previously unseen in Australian deals.
The mystery Chinese bidder was dismissed until one such mystery bidder, state-owned infrastructure enterprise Beijing Capital, romped home to buy the then Transpacific Industries’ New Zealand business in 2014. Beijing Capital beat more established players such as The Carlyle Group and a Macquarie-managed infrastructure fund in that waste auction. More reasons to roadshow in Shanghai and Beijing.
Chinese direct investment into this country peaked in the global financial crisis, as Australian businesses scrambled for capital and turned to the likes of China Investment Corp, a sovereign wealth fund. CIC, for example, bankrolled Goodman Group’s recapitalisation in 2009, when its then lenders lost faith.
Chinese investment into Australia was worth about $US10 billion ($15.8 billion) a year through the 2010s. Big deals included China Merchants’ acquisition of a 50 per cent stake in the Port of Newcastle in 2014, and Landbridge’s acquisition of the Port of Darwin in 2015. It peaked in 2016 at $US11.6 billion, according to data from KPMG, which is the same year State Grid Corp was blocked from buying into NSW electricity distributor Ausgrid.
But political relations soured and bankers stopped going to China. There was little appetite in either country for cross-border deals.
So, while Australia had an M&A boom in 2021 and 2022, bankers were looking elsewhere. The biggest offshore bids were either from North America (Afterpay) or involving syndicates anchored by North American investors (Sydney Airport, AusNet, Spark Infrastructure).
However, the political situation between China and Australia is thawing. Prime Minister Anthony Albanese heads to Beijing next month, billed as an Australian prime minister’s first visit to China in more than seven years.
Foreign investment fears
Ahead of the trip, there have been some concessions on both sides: Australia will not tear up Landbridge’s 99-year lease at the Port of Darwin, according to a statement from the Department of Prime Minister and Cabinet on Friday, while China is reviewing tariffs on Australian wine.
What does it mean for deals? Is the China bid coming back?
Not yet. It is way too early. Beijing and Shanghai are not on roadshow itineraries, although some banks have sent a senior banker or two for a reconnaissance trip to meet with their China-based offices and industry players.
Their feedback is that interest in Australian assets and businesses is lukewarm, at best. There are still fears in China about Australia’s foreign investment regime, and how open the borders really are for such deals. Enthusiasm in meetings with Chinese tyre kickers is nowhere near what it was a decade ago.
So, it is too early to be spending time fishing for Chinese buyers, just yet.
But Australian bankers are monitoring it; always on the lookout for buyers of Australian businesses, or new sources of capital for the next Goodman Group. They were encouraged by FIRB chairman Bruce Miller’s comments late last year, when he said thawing of Australia-China relations could spur heightened merger and acquisition interest from Beijing.
The statistics back that up. Investment into Australia from China is still well behind Japan, Singapore, the US and Canada, according to quarterly data from FIRB. In the June quarter, FIRB approved 48 commercial proposals from China-based applicants, worth $800 million.
The one place China is still well out in front is residential real estate proposals, with FIRB approving 826 worth a combined $1.1 billion in the June quarter and 1775 in the 2022-23 financial year. That’s not investment banker territory, unless you are talking about where they like to live.
So, it is a watching brief. But sentiment can turn on a dime. All it would take is one Beijing Capital-Transpacific, and the bankers will be back at Flair.
Introducing your Newsfeed
Follow the topics, people and companies that matter to you.
Find out moreRead More
Latest In Financial services
Fetching latest articles