China’s Fosun to Continue ‘Genuine’ Overseas M&A

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Fosun International, one of China’s most acquisitive conglomerates, brushed off the impact of a crackdown on overseas dealmaking and said it welcomed Beijing’s guidelines on offshore investment, as it posted a record jump in first-half profits.

After several years of splashy overseas acquisitions, China has tightened the screws on deals abroad and has leant on banks to reduce lending that helped fuel the shopping spree. In June, Beijing ordered a group of lenders to assess exposure to some of China’s more aggressive dealmakers, including Fosun, HNA Group, Dalian Wanda Group and Anbang Insurance Group.

Fosun, best known outside China for its acquisition of French resort chain Club Med and Britain’s Thomas Cook Group, dismissed concerns that it was being investigated.

“We haven’t sensed or have been informed that we are being investigated by the regulators,” Fosun CEO Wang Qunbin said at a press briefing on Thursday, adding tougher rules were “good news” for the company. “Fosun always insists on genuine investments which are in line with the regulation.”

Investors cheered the comments, driving up Fosun shares as much as 11 percent to a more than 2-year high early on Tuesday, a day after the company said growth in its core businesses – including Fosun Pharma, Club Med and Yuyuan – had helped its half-yearly net profit climb by about a third.

The company raked in a record net profit of 5.86 billion yuan ($889 million) over the six months ended June, versus 4.39 billion yuan a year ago. Its net gearing ratio, a long-time concern among investors and analysts, fell to 47.4 percent from 60.3 percent at end-2016, mainly due to its $3 billion exit from U.S. insurer Ironshore Inc.

Fosun has been the poster child for a decade-long overseas push that saw Chinese bidders spend a record $105 billion on assets ranging from film studios to football clubs in 2016.

While there were worries about Fosun’s strategy after co-founder Liang Xinjun stepped down as CEO in March in a surprise management reshuffle, billionaire chairman Guo Guangchang dismissed such concerns saying the latest earnings demonstrated the capability of the new management team.

According to its executives, Fosun will continue to conduct overseas deals and scout for targets in areas including drug manufacturing and artificial intelligence.

Its unit Shanghai Fosun Pharmaceutical Group in mid-August said it was bidding for a stake in U.S. specialty drugmaker Arbor Pharmaceuticals LLC.

The Chinese cabinet has issued new guidelines to regulate overseas investment as Beijing looks to support investments in sectors such as advanced technology and high-tech manufacturing, while restricting deals in sectors ranging from property, hotels and entertainment to sports clubs and films.

($1 = 7.8251 Hong Kong dollars) ($1 = 6.5904 Chinese yuan) (Reporting by Julie Zhu, additional reporting by Anne Marie Roantree; editing by Clara Ferreira Marques and Himani Sarkar)