Financial Firms Hunting Asian Acquisitions
Banks, brokers, fund managers and insurers in the U.S. and Europe are taking advantage of tumult in the Asian markets by buying regional counterparts at bargain prices.
Companies ranging from NationsBank Corp. and United Asset Management Corp. in the U.S. to Credit Suisse Group and Germany’s Commerzbank are among those saying they’re looking to buy. Asian markets from Seoul to Jakarta, Indonesia, are in turmoil as slowing economic growth and huge debt caused stock markets to plummet as much as 70% this year.
Still, economies in the region are among the fastest-growing in the world, and cash-rich U.S. and European buyers want to take advantage of the declines to snap up Asian companies that were too expensive to merit a look.
“There are business opportunities in Asia that weren’t there a year ago,” said Richard Gross, head of international investment banking at Charlotte, N.C.-based NationsBank, the fifth-largest U.S. bank.
Citicorp, the second-biggest U.S. bank, agreed this week to buy control of Bangkok City Bank after shares of the Thailand firm lost more than half their value in four months. Zurich Group, the largest Swiss insurer, will pay $200 million to become the biggest shareholder of Hong Kong-based investment bank Peregrine Investments Holdings Ltd.
Alliance Capital Management, a New York-based fund manager, recently agreed to buy 20% of Hanwha Investment Trust Management Co., a South Korean money manager.
And State Street Global Advisors, one of America’s largest fund managers, with about $380 billion in assets, formed a joint venture with Hong Kong’s Mansion House Group Ltd. to market funds to investors in China in June.
“Over the next 10 years, 50% of all personal wealth in the world will be created in Asia,” said Nicholas Lopardo, head of State Street Global, a unit of Boston-based State Street Corp.
Such transactions are designed to broaden the companies’ activities in a region they consider essential to their long-term expansion plans, even though the financial turmoil has discouraged many investors from putting money into Asia.
Stocks in South Korea, the Philippines, Malaysia and Thailand fell more than 50% this year. On July 2, Thailand’s government devalued the country’s currency after a futile effort to maintain the baht’s link to the dollar. In subsequent weeks, the governments of the Philippines, Malaysia and Indonesia abandoned similar dollar ties.
Japan and South Korea also are engulfed in economic turmoil, their markets continuing to slump. This week, Japan’s fourth-largest brokerage, Yamaichi Securities Co., collapsed. The failure demonstrated the fragility of the banking system in a country where stocks have fallen steadily since late 1989.
Some analysts question whether U.S. and European companies are wise spending millions or even billions of dollars to buy Asian companies, because the financial crisis is far from being resolved.
