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China M&A: Unwrapping Three Recent Deals Involving Smithfield Foods, Blackstone And CITIC Capital

|Includes:ASIA, Pactera Technology International Ltd. (PACT)

In the last month, three large takeovers were announced involving Chinese companies. In two of these, PE buyout firms (CITIC Capital and Blackstone) are offering to take private Chinese companies (AsiaInfo-Linkage and Pactera) quoted on the US stock exchange. In the third, a Chinese acquirer (Shuanghui International) has offered to purchase all shares of US pork producer Smithfield Foods.

I've done a quick comparison of these deals across a range of financial variables - premium offered to current shareholders, p/e ratio, profit growth, last two years' share price performance. I've also offered my own judgment on the scale of risk for the acquirer and the industrial logic of the deal, on a scale of 1-10.

The results: the troubled deals, the ones with the highest risks and deepest uncertainties about future performance, with the most anemic share prices up to the date of the offer, with claims or investigations of accounting fraud, with the least industrial logic, are commanding the higher price.

Ah, the Mysterious Orient.

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Stocks: PACT, ASIA