(Dec 12): This year is poised to be the busiest in nearly a decade for takeover deals involving a range of Hong Kong-listed companies, from skincare brands to warehouse operators. Allied to that has been an uptick in bidding wars as some firms jostle for assets.

China Mobile Ltd’s pursuit of broadband provider HKBN Ltd is likely to face competition from US private equity firm I Squared Capital, Bloomberg News reported on Wednesday. Greatview Aseptic Packaging Co chairman Jeff Bi is in talks with Chinese investor Cloudview Capital about a joint buyout bid to rival one from Shandong Newjf Technology Packaging Co. 

At US$38 billion (RM168.56 billion), the volume of mergers and acquisitions (M&A) targeting Hong Kong-listed firms is the highest since 2017, according to data compiled by Bloomberg. Deals include the creation of China’s biggest brokerage through the combination of Guotai Junan Securities Co and smaller rival Haitong Securities Co.

Another battle in the spotlight involved packaging company CPMC Holdings Ltd, whose minority shareholder ORG Technology Co competed with China Baowu Steel Group Corp and China Reform Investment Co in bidding for the firm. While CPMC’s largest shareholder Cofco Corp accepted the state-backed consortium’s offer, it fell short of shareholder support and lapsed in September, potentially paving the way for ORG.

“Regardless of the winner, if these transactions progress smoothly and the Hong Kong Takeover Code is seen to work well, we can expect to see further opportunistic approaches to public shareholders,” said Simon Kavanagh, a partner of investment bank BDA Partners. 

The trend would be a welcome catalyst for the local stock market, added Kavanagh, who also heads BDA’s Hong Kong office and industrials practice. 

Hong Kong’s benchmark Hang Seng Index is on track for its first annual gain since 2019, rising more than 18% so far this year, boosted by a sharp rally in September.

Despite the recent uplift, Kavanagh said, the Hang Seng Index is still trading at half the price-earnings ratio of the S&P 500 Index, so there is value to be found on the Hong Kong market.

Another busy area of deals has come from controlling shareholders taking companies private as they traded at a discount to elsewhere. 

L’Occitane International SA’s billionaire owner Reinold Geiger took the skincare company private in a US$6.4 billion deal, ending its 14-year run on the Stock Exchange of Hong Kong. Just this month, a group of investors made a US$7 billion binding offer for Hong Kong-listed logistics real estate firm ESR Group Ltd.

The jump in the volume of take private deals in Hong Kong has been driven by low market valuations and the lack of liquidity, according to Elaine Tan, a senior manager for Deals Intelligence in Asia-Pacific at LSEG. 

“This momentum is expected to continue into next year, as companies aim to avoid market volatility and investors capitalise on the lacklustre market to take companies private,” Tan said.

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