Traffic lights ahead

China's M&A juggernaut runs into new traffic light

Foreign groups dealing with potential Chinese buyers have a new regulatory headache. Conglomerate HNA Group has delayed a shareholder vote on its $6-billion bid for US electronics distributor Ingram Micro after the Shanghai Stock Exchange belatedly raised questions about the deal. It's another reason for companies to treat suitors from the People's Republic with scepticism.

Tianjin Tianhai, one of HNA's listed subsidiaries, struck the surprise deal to buy Ingram Micro back in February. It's part of a spending spree in hotels, aviation and logistics that has seen the Hainan-based group announce deals worth more than $10 billion in the past year.

Just one month before a deadline to complete the Ingram transaction, the Shanghai Stock Exchange sent the Chinese buyer a letter asking for extensive details on how the deal was financed. Though Tianjin Tianhai says it will make a "concerted effort" to reply, it has pushed back a shareholder vote by a week, to July 29. Ingram Micro has the right to walk away with a $400-million break fee if approvals are not in place by August 15.

It's not clear whether the eleventh-hour snag is due to foot-dragging by Tianjin Tianhai in providing the information, disorganisation on the part of the exchange, or something more serious. But whatever the explanation, it's a new source of uncertainty for companies involved in cross-border deals with Chinese buyers.

To date, lawyers in the People's Republic have focused their attention on three major regulators: The Ministry of Commerce and the National Development and Reform Commission must give buyers the green light, while the State Administration of Foreign Exchange needs to approve large foreign currency transactions. Though listed companies making overseas purchases also need stock exchange clearance, this had been viewed as a formality. No longer.

Anbang Insurance dented the reputation of buyers from the mainland in March when it walked away from its $14-billion bid for Starwood Hotels and Resorts amid talk that China's insurance regulator had objected to the deal. Two months later machinery maker Zoomlion walked away from its bid for US cranemaker Terex. Now China's M&A juggernaut might be facing another traffic light.