Just days after making headlines for being selected to buy Portugal's top insurer, Chinese investment firm Fosun International (OTCPK:FOSUF) is back in the news as a finalist in the bidding for Forbes Media, publisher of Forbes magazine. The deal is just the latest in a recent series of major purchases for Fosun, and more broadly kicks off a year that could see record overseas M&A by a rising group of Chinese investment firms. Fosun's evolving strategy seems to target companies that are profitable but also laggards in their areas, which is relatively common among such investors. But in this case, I have serious doubts about its pursuit of Forbes due to the global rapid decline of the traditional media industry.
The latest flurry of reports all stem from stories in the Financial Times and Wall Street Journal that say Fosun is one of 6 buyers in the final round of bidding for Forbes, which also hosts conferences and publishes the most famous list of the world's richest people. (English article) Other bidders include German publishing giant Axel Springer (OTC:AXELF) and another Chinese bidder called Whale Capital Group. The Forbes family formally put the company up for sale last November, and an initial round of bidding attracted 18 potential buyers.
Reports say the 6 remaining bidders have offered between $350 million and $475 million for the company. One report points out that Fosun and Forbes already have a relationship through their partnership in the Chinese edition of Forbes magazine. The pair formed that partnership in 2009 and since then the publication has managed to go from losing money to earning a profit, according to one report. That existing relationship could indeed give Fosun an advantage in the bidding, especially if Forbes believes that its China business could be a big growth driver in the future.
The Forbes bid follows a steady string of deals for Fosun, which splashed into the headlines last May when it joined a management-led group aiming to buy out French resort operator Club Med (OTC:CLMDF) for 540 million euros. Last October the company was in the headlines again when it paid $725 million for the landmark One Chase Manhattan Plaza in New York, home to Chase Manhattan Bank. And a week ago, Fosun was picked by the Portuguese government to buy 80 percent of the nation's largest insurer, Caixa Geral de Depositos, for 1 billion euros. (previous post)
Fosun's wide range of targets comes as a flurry of other outbound investments by Chinese firms also makes headlines. Last week steamed bun maker Goubuli announced it had reached a preliminary deal to buy a major US coffee chain, and this week Bright Food announced a major purchase in Australia. Also this week, media reported that Hony Capital, the investment arm of PC giant Lenovo's (OTCPK:LNVGF) parent company, was exploring a possible bid for United Biscuit, one of the Britain's leading food companies. All that activity indicates that 2014 could be a banner year for outbound Chinese M&A, as cash-rich firms look for underperforming assets in North America, Europe and key developing markets.
All that said, let's return to Fosun and its investment strategy so far. Each of the deals I've mentioned above is structured differently, which could affect their chances of success. The Club Med deal looks the best to me, as Fosun is joining a management-led team in the bid, which should help to manage the asset. Forbes looks more questionable, mostly because of the precarious position for traditional media companies in general. That eroding situation is probably what led the Forbes family to sell in the first place, and I have serious doubts if Fosun or anyone else would be able to stop a company decline that is part of a broader global trend.
Bottom line: Fosun stands a good chance of winning the bidding for Forbes due to a previous relationship, but its subsequent efforts to stop the company's decline are likely to fail.