27 October 2016
Guo Guangchang (second from right), founder of Fosun International, briefly went missing late last year. Photo: HKEJ
Guo Guangchang (second from right), founder of Fosun International, briefly went missing late last year. Photo: HKEJ

Fosun pays HK$20 billion in four overseas takeovers

I always believe Fosun International (00656.HK) is the most interesting private company in China which has become a global conglomerate after the nation’s opening-up.

Established by graduates of Fudan University, the company has had a good track record in capturing big trends.

Its success has reflected China’s social and economic changes over the years.

Fosun has made four acquisitions in the past few days, but these deals have failed to excite the market.

It spent 45 million pounds (US$59.6 million) in acquiring English Championship club Wolverhampton Wanderers.

Interestingly, Wolves announced the acquisition last week, but Fosun has yet to make an official announcement.

It’s been reported that the deal had involved super-agent Jorge Mendes, who represents football stars like José Mourinho and Cristiano Ronaldo and has stakes in the travel agent Thomas Cook, among other interests.

The acquisition is in line with Fosun’s long-time strategy. Instead of acquiring highly sought-after Manchester United or Barcelona, Fosun opted to buy a lesser-known football club with a more reasonable price, and take the team up a notch.

Meanwhile, Shanghai Fosun Pharmaceutical (Group) Co. (02196.HK) is buying a controlling stake in Indian pharmaceutical company Gland Pharma Ltd. for US$1.26 billion. It marks China’s largest takeover of a company in India.

Fosun Group also agreed to buy Brazilian fund manager Rio Bravo Investimentos, which manages about 10 billion reais (US$3.06 billion) of clients’ money. The deal is considered as a stepping stone for Fosun to tap into the Latin America market.

Fosun Industrial Holdings Ltd. has offered to buy a 16.7 percent stake in the largest Portuguese lender, Banco Comercial Português SA, with an intention to raise the stake to 30 percent.

The Portuguese bank has seen its share price plunge over 90 percent to 0.02 euro since 2014.

Its market cap is only 1.2 billion euros (US$1.34 billion) while its P/B ratio is 0.27 times. Fosun has good record of picking good bargains.

It seems Fosun has accelerated its overseas acquisitions after Guo Guangchang, founder of Fosun International, briefly went missing late last year.

For private entrepreneurs in China, global influence is considered an insurance against potential political risks.

Fosun has spent nearly HK$20 billion in those four deals. They are good bargains like the acquisition of Wolves.

It’s quite interesting that Fosun International’s stock price drops every time there is a new deal. The company’s share price has lost 16.4 percent so far this year, while the Hang Seng Index rose 1.3 percent.

The market reaction is not without its reasons. Fosun has always issued new shares in order to raise money for its mega takeovers. It did twice over the last two years.

The company vows to connect China with the world, but most of its overseas deals have yet to pay off.

Investors are still wary of political risk in the wake of Guo’s brief disappearing act. Also, the company’s valuation has been affected by its reputation as a high-leverage investment flagship.

This article appeared in the Hong Kong Economic Journal on Aug. 2.

Translation by Julie Zhu

[Chinese version中文版]

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Hong Kong Economic Journal columnist

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