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Mergers & Acquisitions

China’s TMT deals top US$100bn for second straight year

Tencent and Didi Chuxing complete sector’s biggest single transactions in first nine months, as total M&A values in the sector reach US$110.01bn

PUBLISHED : Wednesday, 12 October, 2016, 5:08pm
UPDATED : Thursday, 13 October, 2016, 7:15am

Mergers and acquisitions in mainland China’s combined technology, media and telecommunications (TMT) sector have passed the US$100-billion mark for the second consecutive year, led by big-ticket deals involving Tencent Holdings and Didi Chuxing.

Data obtained from Mergermarket showed the latest milestone was reached much earlier than last year, as 314 deals valued at US$110.01 billion were completed in the nine months to September 30.

There were 349 transactions worth US$73.07 billion recorded in the same period last year.

Mergermarket financial researcher Sophie Jin said the pace of mergers and acquisitions is being driven by Chinese companies’ increased appetite for high-value assets, including media content, financial technology and so-called big data resources.

“China-related TMT deals are expected to continue their strong growth this year, despite macroeconomic factors like Brexit and the US election,” Jin said.

The total value of Chinese mergers and acquisitions in the TMT sector last year reached a record-high US$156.79 billion on 481 deals, up from 324 transactions valued at US$53.98 billion in 2014.

Mergermarket covers announced deals valued at more than US$5 million, excluding lapsed and withdrawn bids. Other excluded activities include property transactions and corporate restructurings in which the ultimate shareholders’ interests are not changed.

China-related TMT deals are expected to continue their strong growth this year, despite macroeconomic factors like Brexit and the US election
Sophie Jin, financial researcher, Mergermarket

Hong Kong-listed Tencent has topped all China-related TMT mergers and acquisitions so far this year, with its US$8.6 billion purchase of an 84.3 per cent stake in Finnish mobile game developer Supercell from owner SoftBank Group Corp and certain Supercell shareholders.

That deal, announced in June and closed last quarter, is the single biggest investment in a video games company by Shenzhen-based Tencent. It also owns significant interests in US developers Riot Games, Epic Games, Glu Mobile and Activision Blizzard, as well as South Korean firm CJ Games and Japanese company Aiming.

Founded in 2010, Supercell has brought four top-grossing games to market on Apple’s iOS and Google’s Android mobile platforms – Hay Day, Clash of Clans, Boom Beach and Clash Royale – which Supercell estimates as being played daily by more than 100 million people.

China is the world’s biggest video games market, with total revenue of US$24.37 billion last year, according to estimates by research firm Newzoo.

The Supercell deal ranked as the fifth-largest global TMT transaction in the past nine months, according to Mergermarket.

The top global deals during the period were Japanese conglomerate SoftBank’s US$30.16 billion buyout of a 98.55 per cent stake in British semiconductor design company ARM Holdings and US chip firm Analog Devices’ US$12.99 billion takeover of Linear Technology Corp.

In addition, there were Hewlett Packard Enterprise’s US$8.8 billion merger with British information technology firm Micro Focus International and Oracle’s US$8.69 billion acquisition of NetSuite, the world’s leading provider of cloud-based business management software.

Didi Chuxing, China’s dominant ride-hailing service provider, recorded the second-biggest China-related TMT deal in the past nine months, with its US$7 billion takeover of Uber Technologies’ operations on the mainland.

That transaction brought together Chinese internet giants Alibaba Group, Baidu and Tencent, and US tech titan Apple as shareholders in Didi. Alibaba owns the South China Morning Post.

While the pace of Chinese TMT deal-making has ratcheted up this year, Mergermarket said the record value of transactions last year would be hard to top.

In the fourth quarter last year, the mainland’s “big three” telecommunications network operators agreed to sell and transfer assets worth US$33.69 billion to their ambitious infrastructure-shari­ng joint venture, China Tower Corp.

That massive asset infusion was expected to advance the joint venture’s goal of reducing duplication and redundant construction of telecommunications towers and related infrastructure by China Mobile, China Unicom and China Telecom in the world’s second-largest economy.