ANNUAL REPORT

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Chinese acquisition deals, the number of CFIUS-reviewed Chinese
transactions has decreased every year since 2012. 216
A number of China’s M&A deals have unraveled, in some cases
due to regulatory concerns, in others due to the inability of
Chinese buyers to follow through with financing (see Table 5).
According to data from international financial software firm Dealogic,
nearly half of the unsolicited offers made by Chinese companies
over the past five years have failed. 217 Notably, in March
2016 the Chinese insurance giant Anbang surprised Starwood
Hotels & Resorts Worldwide by abandoning its $14 billion bid
for the hotel chain, without offering a full explanation.* Worried
about the ability of Chinese companies to secure financing or
pass CFIUS review, a growing number of U.S. acquisition targets
are asking for escrow accounts or letters of credit to guarantee
deal financing or breakup-fee payments. 218
Chinese investment in the United States is expected to grow,
but perhaps at a more moderate pace than the breakneck speed of
the first quarter of 2016. 219 With increased M&A activity, Chinese
companies face rising pressure from U.S. business and government
stakeholders to be transparent, particularly with regard to ownership
structure, corporate governance, and funding sources. 220 The
increasingly high leverage of Chinese companies † also places financial
constraints on their ability to pursue new investment opportunities
overseas. 221
Table 5: Failed Chinese Bids for U.S. Companies, 2015–2016
Chinese
Buyer
U.S. Target
Price
(US$
billions)
Status
Industry
Montage
Pericom
Semiconductor
Corp.
$0.4
Pericom rejected
bid, citing a lack of
committed financing
and potential
regulatory hurdles
in China, Taiwan,
and the United
States, Nov. 2015
Semiconductors
Tsinghua
Unigroup
Micron $23.0
Micron rejected
bid, citing concerns
over CFIUS approval,
Feb. 2016
Semiconductors
* Anbang said it was withdrawing its offer “due to various market considerations.” However, Caixin
reported that Anbang’s decision likely stemmed from fears that China’s insurance regulator would reject
its bid to buy Starwood, since it would put Anbang’s offshore assets above a 15 percent threshold
for overseas investments. Chinese regulators’ concerns over Anbang’s reliance on high-cost borrowing
for its overseas acquisitions may have been another contributing factor. In a panel discussion days before
Anbang withdrew its bid, China’s former Minister of Commerce Chen Deming said the company
should not use high leverage to acquire overseas assets, warning that “it will leave us with systemic
risks.” Esther Fung, “Anbang: What We Know and Don’t Know,” Wall Street Journal, August 23, 2016;
Greg Roumeliotis and Matthew Miller, “China’s Anbang Abandons $14 Billion Bid to Buy Starwood
Hotels,” Reuters, April 1, 2016; and Ding Feng, “Regulator Said Close to Rejecting Insurer’s Plans for
Foreign Hotel Investments,” Caixin, March 22, 2016.
† According to data from S&P Global Market Intelligence, the median debt-to-equity ratio of
Chinese buyers since the beginning of 2015 has been 71 percent, compared to 44 percent for
foreign targets. Economist, “Money Bags: China’s Global Investment Spree Is Fueled by Debt,”
April 2, 2016.