The Chinese seafood sector is heavily indebted, but that’s not stopping some of the country’s largest industrial conglomerates from trying to purchase major fishing companies with access to salmon, lobster, squid and tuna resources – all of which are in demand in China.
The Chinese companies are seeking ways to compensate for falling returns in their traditional industries, noted a western investment banker tasked recently with looking over a northern European and a Canadian seafood firm for a Chinese client.
Being acquired by a Chinese company is welcomed by many companies who see the exposure to the Chinese market as a huge boost to their valuation. One recent high-profile example is the acquisition of a large U.S. pork firm, Smithfield, by the Chinese firm Shuanghui. The subsequent IPO saw a stampede of investors seeking shares in the entity.
Chinese companies are keener than ever to buy overseas assets due to a slowing economy and lower returns in China. But the ease with which Chinese firms have been able to acquire Western companies has caused resentment among Western firms blocked from making a similar type of acquisition with the goal of gaining direct access to the domestic Chinese market.
The dispute is beginning to trickle into political negotiations between the United States and China, particularly in ongoing talks regarding the Bilateral Investment Treaty. American trade officials have expressed their frustration with China for not narrowing the ‘negative list’ of industries into which it doesn’t allow foreign investment. The U.S. is threatening to amend U.S. legislation so that it allows investment from state-owned enterprises only in cases where the U.S. has a BIT in place with the country in question.
This is very significant, given that SeafoodSource has heard lots of anecdotal evidence in Beijing of Chinese companies seeking to buy foreign producers of seafood. And many of the Chinese purchasing companies eyeing up overseas seafood firms are large state-owned conglomerates.
