Corporate ChinaWanda Global binge likely to target real estate

Media have been buzzing about possible acquisition targets by Wanda Group, a top Chinese real estate firm, after the company's talkative founder Wang Jianlin disclosed he has a massive war chest for global purchases. Some have speculated the new buying binge could focus on hotels or other service-oriented businesses, following Wanda's big recent moves into the hospitality business and its landmark purchase last year of AMC Entertainment, the second largest US movie theater operator. But I would bet my money on real estate, as that's what Wang knows best and it's an area where Chinese firms in general have shown a strong interest in buying overseas assets. 

Wang added his view that his major foreign acquisitions have been surprisingly easy, even in sensitive western markets like the US where local officials are sometimes wary of such investments. I'll admit that I was among the earlier skeptics, predicting that Wanda's $2.6 billion (HK$20.2 billion) deal to buy AMC Entertainment last year could ultimately get blocked due to political sensitivities. But the deal was approved with little or no controversy. The approval of another more sensitive sale of leading US pork products maker Smithfield (NYSE: SFD) to China's Shuanghui late last week also seemed to reinforce the fact that western governments won't block most major Chinese M&A for political reasons.

So the interesting question becomes: What assets will Wang target in his new buying binge, and is he likely to pay a big premium? Some have speculated companies like Marriott (NYSE: MAR) and Starwood (NYSE: HOT) could be in his sights, as both are premier names in the hotel management space. But with market values of more than $10 billion (HK$77.5 billion), both of those companies are probably well out of Wanda's price range. And besides, I do think that Wang will focus on firms that have a big real estate component, rather than on companies that provide services like hotel management.