China’s Zhonghong nears deal for US care chain Brookdale
Chinese conglomerate Zhonghong Zhuoye Group is close to agreeing to a deal for New York-listed Brookdale Senior Living, according to two people with knowledge of the matter. One person involved in the deal said an agreement could be reached in the coming days but stressed it was not yet finalised. The sale could fetch more than £4bn, the person said.
Chinese regulators have slowed outbound investment in recent months and people familiar with the situation have said it is still difficult for companies to win approval for multibillion-dollar acquisitions overseas. Zhonghong’s acquisition of Brookdale, which runs a chain of elderly care facilities, would be one of the largest cross-border acquisitions from China this year. It would also be the second major overseas transaction for the Chinese group after it bought a 21 per cent stake in US theme park SeaWorld Entertainment earlier this year from Blackstone for £429m.
Zhonghong plans to bring the theme park to China. Reuters first reported news of the talks between Zhonghong and Brookdale. Zhonghong started in the mid-1990s in the auto services industry, according to a state media profile of its chairman, Wang Yonghong.
It later built gas stations and eventually moved into commercial property. It is the developer behind at least one large Beijing commercial property project. Before taking the stake in SeaWorld, Zhonghong also bought US luxury travel company Abercrombie & Kent last year.
The deal by the Beijing-based company comes at a time when China is cracking down on overseas acquisitions in which buyers pick up assets that are outside of their core competencies. Spending on healthcare has represented a small portion of cross-border deals this year, totalling about £2.6bn, according to data from Thomson Reuters. State-owned conglomerate China Resources bought Australia’s cancer treatment centre GenesisCare last year for A£1.7bn, one of China’s largest healthcare deals.
Pharmaceutical companies have also been in the sights of Chinese companies, with Sanpower Group buying US-based biopharmaceutical company Dendreon for £819m earlier this year. Sanpower, which owns the UK’s House of Fraser, also has roots in commercial real estate. Chinese regulators have said they will scrutinise deals in which property developers buy non-property assets overseas, as well as acquisitions of entertainment and film related companies.
Several high profile deals, such as Dalian Wanda’s £1bn acquisition of Dick Clark Productions, have been pulled due to the crackdown on spending abroad. Like Dalian Wanda, which is led by Wang Jianlin, one of Asia’s richest men, Zhonghong has diversified from property assets and has targeted entertainment and services businesses overseas. Wanda owns AMC Entertainment, the world’s largest cinema chain, and Legendary Entertainment, the US media group.
Chinese companies have agreed to spend about £60bn on overseas assets this year to date, a significant decrease from last year. Many outbound buyouts have been in resources and mining. In the largest Chinese overseas deal, sovereign wealth fund China Investment Corp agreed to buy Logicor, a pan-European logistics company, from Blackstone for EUR12.25bn earlier this month.
Zhonghong and Brookdale could not be reached for comment on Wednesday.
- ^ slowed outbound investment (www.ft.com)
- ^ 21 per cent stake (www.ft.com)
- ^ Blackstone (markets.ft.com)
- ^ £1bn acquisition (www.ft.com)
- ^ Wang Jianlin (www.ft.com)
- ^ agreed to buy (www.ft.com)