41.6 Billion USD invested in M&A (vs Billion in 9M 2012) 57% M&A (vs. 56% M&A in 9M 2012)

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1 The reference indicator for Chinese outbound investments worldwide & for the globalization rate of the Chinese Economy 9M 2013 Full Year DRAGON INDEX TM hits 2483 points, ODI +20%, FDI +5% Chinese M&A: 57% in Resources, 71% are Takeovers, 59% in North America 71% of North American deals in Resources. Europe represents 30% of all Industry & Services deals This A CAPITAL DRAGON INDEX TM analyses the first 9 Months 2013, by purpose, by region, by type of Chinese investor, by type of transaction. A special focus on Europe, North America, Africa and Private Firms is available Billion USD invested in M&A (vs Billion in 9M 2012) 57% M&A (vs. 56% M&A in 9M 2012) 24.7 Billion USD M&A in North America (vs. 8.6 Billion in 9M 2012) Copyright A CAPITAL 2013 Page 1

2 KEY TRENDS 1 : Chinese ODI pursues fast growth Chinese Outbound Investments (ODI) grew almost 3 times faster than Chinese GDP (+20%) 73 Billion USD invested overseas during first 9 M 2013 (vs 61 Billion USD in 9M 2012) 41.6 Billion USD invested in companies=mergers & Acquisitions (vs 34.3 Billion) M&A grew 21% and represent 57% of all outbound investments (vs 56%) => MAJOR GO GLOBAL TREND ACCELERATES WITH CHANGING ECONOMIC MODEL North America booms (almost 3x compared to last year) and leads (60% of all M&A) 24.7 Billion USD invested in M&A North America (vs 8.6 Billion) Europe dropped 25% to 5.8 Billion USD (vs 7.7 Billion) Only 13,9% of all M&A go to Europe (vs 22%) Without Nexen, North America would represent 36% of M&As (and 22% for Europe) Except Germany (up 72%), France (stable), other European economies are down => DESPITE POLITICAL NOISE, NORTH AMERICA IS PERCEIVED AS EASIER TO DO BUSINESS SOE* remain driving force (75% of all M&A vs 84%), as well as Takeovers (71% vs 40%) SOEs remain dominant also in deal numbers (60% of all deals, vs 59%) Minority deals down 40% in value (11,9 Billion vs 20 Billion) as well as numbers (22 vs 27) NO GAMECHANGER YET (AS SOE/TAKEOVERS REMAIN CHALLENGING) ODI is quickly closing the gap with FDI with 82% of FDI (vs 74%) A CAPITAL forecasts ODI to equal FDI in the next 3 years Forecast confirms A CAPITAL estimates early 2012 => A CAPITAL CONFIRMS FORECAST OF HALF-A-TRILLION USD ADDITIONAL ODI UNTIL 2016 * SOE: State-Owned Enterprises Copyright A CAPITAL 2013 Page 2

3 KEY TRENDS 2 : Chinese ODI changing patterns Slowing down of Resources investments (+7% only) Resource investments at 23.7 Billion USD (vs 21.5 Billion) Number of deals dropped by 45% to 15 (vs 23) Resource represent 56% of all deals (vs 65%) RESOURCES ARE SLOWING, DESPITE NEXEN BOOST (ALONE 63% OF ALL RESOURCES M&A) The Rise of the Private Investors (almost+100%), double their investments in NorthAmerica + Europe Total deal value up 86% at 10.4 Billion USD (from 5.6 Billion), number down to 27 (from 35) North America attracts 68% of all Private deal value, Europe 15% Private firms represent 28% of all M&A in BOTH North America and Europe PRIVATE FIRMS GOING FOR BOLDER MOVES AND DEVELOPPED MARKETS Industry & Services (Non Resources) pick up sharply (+46%) 17,9 Billion (vs 12.6 Billion) thanks to the large Smithfield transaction. 40% in North America, 30% in Europe Dropped 11% in Europe to 5.4 Billion USD (from a record 6.1 Billion USD) Asia up 69% with 4,5 Billion USD (from a exceptionally low base of 2.6 Billion) => CHINESE INVESTORS INCREASINGLY GOING FOR HIGH ADDED-VALUE FIRMS Blockbusters set the tone & are larger and larger (Top 5 Deals = 72% of total, vs 22% a year ago) CNOOC-Nexen : largest deal since the start of the Dragon Index, alone 36% of total 2 major deals = 90% of all North American M&A: CNOOC/Nexen (15 Billion, Canada), Shuanghui/Smithfield (7 Billion, USA) Average size of deals increased by 50% at 603 Million USD (vs 399 Million) => CHINESE INVESTORS WITH INCREASED FINANCIAL AND TECHNICAL CAPABILITIES Copyright A CAPITAL 2013 Page 3

4 1. BY SECTOR : What is the purpose of Chinese investments? (USD million, By deal Value, M&A only) Copyright A CAPITAL 2013 Page 4

5 BY SECTOR : What is the purpose of Chinese investments? Key trends identified by the A CAPITAL Dragon Index : Slowing down of Resources investments (+7% only) Resources remain the largest recipient for Chinese outbound investments, but their share declined in total value to 56.9% of all M&A deals in 9M 2013 (vs 64% in 9M 2012). Resource investments at 23.7 Billion USD (vs 21.5 Billion) One large transaction (CNOOC/Nexen 15 Billion USD) represent almost 63% of all resource transactions Number of deals dropped by 45% to 15 (vs 23) Industry & Services (Non Resources) pick up sharply (+46%) Industry & Services increased to 17.9 Billion USD in 9M 2013 (vs 12.6 Billion USD in 9M 2012) Main deals : 7 USD Shuanghui/Smithfield takeover (USA), 2 Billion minority deal Chengdong (CIC)/Uralkali 40% in North America, 30% in Europe 11% drop in Europe: boost in Industry at 4.4 Billion USD (vs 1.3 Billion). Services dropped to 1 Billion (vs 4.8 Billion) Asia up 69% with 4,5 Billion USD, remains strong in Services (doubled to 3.5 Billion from increased 1.7 Billion USD) M M Copyright A CAPITAL 2013 Page 5

6 2. BY REGIONS : Where do Chinese investments go? (USD million, By deal Value, M&A only) Copyright A CAPITAL 2013 Page 6

7 BY REGIONS : Where do Chinese investments go? Key trends identified by the A CAPITAL Dragon Index : North America booms (almost 3x compared to last year) and leads (60% of all M&A), Europe drops by 25% Largest increase with +286% driven by CNOOC-Nexen deal (15.1 Billion USD), Smithfield foods acquisition by Shuanghui (7 Billion USD) and Sinopec s acquisition of the Natural Resource Assets of Pioneer (1.8 Billion USD) Caution: without Nexen, North America would represent only 36% of M&A (and Europe would be STABLE at 22%) Asia is regaining traction with 4.6 Billion USD M&A (vs 3.1 Billion), mainly in the services sector After leading over the past 2 years, Europe sees a 25% drop to 5.8 Billion USD (vs 7.7 Billion), 13,9% of total (vs 22%) Except Germany (up 72%), France (stable), Chinese ODI to other countries is decreasing Reduced focus on Resources affected the traditional destinations such as Oceania/Australia (2 Billion vs 6 Billion) and South America (To almost zero: 28 million USD, vs 5 Billion) A CAPITAL CONFIRMS ITS FORECAST OF HALF-A-TRILLION USD ADDITIONAL IL END DESPITE POLITICAL NOISE, NORTH AMERICA IS SO FAR PERCEIVED 2016 AS EASIER TO DO BUSINESS FOR CHINESE INVESTORS M M Copyright A CAPITAL 2013 Page 7

8 BY REGIONS : Focus on Industry and Services Deals (USD million, By deal Value, M&A only) Key trends identified by the A CAPITAL Dragon Index : North America took over Europe s lead destination position for Industry & Services (Non Resources) for the first time since the start of the DragonIndex, thanks to the Smithfield/Shuanghui transaction (7.1 Billion vs 5.4 Billion) Europe remains most attractive destination for Industry & Services with 10 deals (despite value drop of 11%) Largest Industry deal in Europe: CIC s Subsidiary Chengdong Investment 12.5% stake in Uralkali (2 Billion USD, Russia) Asia saw large investments in Telecom (CITIC Telecom/ Companhia de Telecomunicacoes de Macau, 1.1 Billion USD) and Financial Services (CITIC Securities/CLSA, 900 Million USD) Copyright A CAPITAL 2013 Page 8

9 BY REGION: Focus on Europe (USD million, By deal Value, M&A only) Key trends identified by the A CAPITAL Dragon Index : Chinese M&A dropped by 25% to 5.8 Billion USD : grew in Industry (x3,4) but fell in Services (-79%) Europe dropped 25% to 5.8 Billion USD (vs 7.7 Billion) Industry at 4.4 Billion USD (vs 1.3 Billion). Services at 1 Billion (vs 4.8 Billion) Noteworthy: without the Nexen deal, Europe would be PERFECTLY STABLE at 22% of all M&A Top 2 : Russia (2.1 Billion Uralkali/CIC), Germany up 72% (1,3 Billion - Oerlikon/Jiangsu deal 700 M) Services economies : stable (France M) or decrease :UK (950 M), Portugal (333 M), Italy (296 M) Eastern Europe still at very early stages Private firms almost doubled their investments (1.6 Billion USD (vs 774 M) SOEs reduced investments in Europe at 4.1 Billion (-40%, vs 6.8 Billion) Copyright A CAPITAL 2013 Page 9

10 FOCUS on Europe : By Type of Transactions/Investors (USD million, By deal Value, M&A only) Type of transactions Type of investor Largest Deals Target Company Quarter Sector Country Stake Bidder Company Bidder Type Deal Value (M USD) Kalahari Minerals Plc 2012 Q1 Resources United Kingdom 100% CGNPC Uranium Resources SOE 955 UPP Group 2013 Q1 Industry United Kingdom 40% Gingko Tree Investment Private 873 Thames Water 2012 Q1 Services United Kingdom 8.68% China Investment Corporation SOE 779 Copyright A CAPITAL 2013 Page 10

11 3. BY TYPE OF INVESTORS : SOEs or Private Firm? Deal Value (USD Million) Number of Deals Key trends identified by the A CAPITAL Dragon Index : SOEs deals are up 8%, remain the Driving Force (75% of all M&As vs 84% last year) SOEs remain dominant also in deal numbers (60% of all deals, vs 59%), even if deal numbers decreased to 42 (vs 51) Driven by the 15 Billion USD CNOOC-Nexen deal Without Nexen, SOEs made smaller deals: 412 Million USD average deal size (vs 587 Million USD) Chinese Private firms are on the Rise (almost +100%), close to a third of all North American and European deals Increased 86% to 10.4 Billion USD (vs 5.6 Billion), with number of deals down to 27 (vs 35) North America attracts 68% of all Private deal value, Europe 15% Private firms represent 28% of all M&A in BOTH North America and Europe A CAPITAL CONFIRMS ITS FORECAST OF HALF-A-TRILLION USD ADDITIONAL IL END CHINESE FIRMS ARE GOING FOR BOLDER MOVES, AVERAGE 2016 DEAL SIZE UP 50% AT AROUND 600 M USD (vs 400 M) Copyright A CAPITAL 2013 Page 11

12 BY TYPE OF INVESTORS : Focus on Private Firms (USD million, By deal Value, M&A only) Key trends identified by the A CAPITAL Dragon Index : North America remained lead destination for Private firms: Smithfield/Shuanghui (vs AMC-Dalian Wanda last year) North America more than doubled (+107%) at 7,1 Billion (vs 3,4 Billion), representing 68% of all Private deal value (vs 60%) Private deals almost doubled also in Europe (95%) to 1,64 Billion USD (vs 841 M) Private firms almost exclusively focused on Industry (83%) and Services (17%) while Resources almost exclusively by SOEs A CAPITAL CONFIRMS ITS FORECAST OF HALF-A-TRILLION USD ADDITIONAL IL END PRIVATE CHINESE FIRMS DOUBLE THEIR INVESTMENTS 2016 BOTH IN NORTH AMERICA AS IN EUROPE Copyright A CAPITAL 2013 Page 12

13 4. BY TYPE OF TRANSACTIONS: Takeovers or Minority deals? Deal Value (USD Million) Number of Deals Key trends identified by the A CAPITAL Dragon Index : Takeovers remain driving force, minority deals down 40% in value (11,9 Billion vs 20 Billion) Takeovers remain the driving force with 71% of all transactions (vs 40%) 2 major deals represent 90% of all North American M&A Number of Takeovers dropped 32% with 47 deals (vs 59) Takeover amount more than doubled to 29,7 Billion USD (vs 14 Billion), driven by 15,1 Billion Nexen takeover Minority deals down 40% in value (11,9 Billion vs 20 Billion) as well as numbers (22 vs 27), mainly due to a lack of large deals like 2012 Sinopec/Petrogal Brazil (30%, 4.8 Billion USD), Three Gorges/EDP (21%, 3.5 Billion USD) A CAPITAL CONFIRMS ITS FORECAST OF HALF-A-TRILLION USD ADDITIONAL IL END OLD TAKEOVER MODEL STILL IN PLACE, NO GAMECHANGER 2016 THAT WOULD MODIFY EXECUTION & PERCEPTION RISKS Copyright A CAPITAL 2013 Page 13

14 TOP 10 DEALS : First 9 Months of 2013 Target Company Sector Country Stake Bidder Company Bidder Type Deal Value (M USD) Nexen Inc Resources Canada 100% China National Offshore Oil Corporation SOE Smithfield Foods, Inc. Industry USA 100% Shuanghui International Private 6949 Eni East Africa Spa Resources Mozambique 28.57% China National Petroleum Corporation SOE 4210 Uralkali JSC Industry Russia 12.5% Chengdong Investment Corporation SOE 2000 Pioneer Natural Resources (Wolfcamp asset) Resources USA 40% Sinochem International Corporation SOE 1831 Companhia de Telecomunicacoes de Macau Services Macau 79% CITIC Telecom International Holdings SOE 1161 CLSA Limited (excluding Taiwan business) Services Hong Kong 80.1% CITIC Securities SOE 918 UPP Group Holdings Ltd Industry UK 40% Gingko Tree Investment Limited Private 873 Talison Lithium Limited Resources Australia 100% Chengdu Tianqi Industry Group SOE 759 WISCO International Resources Resources Canada 100% Wuhan Iron and Steel Company Ltd. SOE 737 Copyright A CAPITAL 2013 Page 14

15 MOST ACTIVE INVESTORS : First 9 Months of 2013 Investors with more than 1 deal in 9 M 2013 : Bidder Company Type Target Company Sector Country Stake Deal Value (M USD) Colombo International Container Terminals Services Sri Lanka 30% 6 China Merchants Holdings SOE Port de Djibouti Services Djibouti 24% 185 Wuhan Iron and Steel Company Hanergy Holdings SOE Private Terminal Link SA Services France 49% 539 ThyssenKrupp Tailored Blanks Industry Germany 100% 334 WISCO International Resources Resources Canada 100% 737 Global Solar Energy, Inc. Resources USA 100% NA MiaSole, Inc. Industry USA 100% 30 Copyright A CAPITAL 2013 Page 15

16 OUTBOUND versus INBOUND CHINA ODI is quickly closing the gap with FDI with 82% of FDI (vs. 74% in 9M 2012) Chinese ODI grew almost 3 times faster than Chinese GDP (+20%) A CAPITAL forecasts ODI to equal FDI in the next 3 years at the end of the 12 th 5 year plan This forecast confirms A CAPITAL estimates early 2012 A CAPITAL CONFIRMS ITS FORECAST OF HALF-A-TRILLION USD ADDITIONAL IL END A CAPITAL CONFIRMS ITS FORECAST OF HALF-A-TRILLION 2016 USD ADDITIONAL CHINESE INVESTMENTS UNTIL END 2016 (USD Billion) Copyright A CAPITAL 2013 Page 16

17 ABOUT THE DRAGON INDEX THE DRAGON INDEX The A CAPITAL DRAGON INDEX is the first index tracking Chinese outbound investments globally. It aims to be the reference indicator of Chinese ODI and will track the globalization rate of the Chinese economy since WTO accession in It is published quarterly by A CAPITAL own research team and measures the growth rate of Chinese outbound investment stock relative to China s GDP. Methodology Figures, charts and data reported in the A CAPITAL DRAGON INDEX are based on data sourced from the National Bureau of Statistics, MOFCOM, UNCTAD, Mergermarket and A CAPITAL proprietary research. A CAPITAL constructed its own dataset based on (i) Publicly available information (ii) Commercial databases (iii) A CAPITAL s own research. Through this bottom-up approach, started in 2010, A CAPITAL collected most confirmed deals, exceeding 5 Million USD, above 10% in stake (definition of ODI) and conducted by a Chinese firm in the world. Contact dragonindex@acapital.hk Copyright A CAPITAL 2013 Page 17

18 ABOUT A CAPITAL A CAPITAL is the leading Euro-Asia private equity fund, with offices in Beijing and Brussels. The fund invests in performing European companies to accelerate their growth in emerging markets, particularly in China. A CAPITAL originated a new and successful partnership model with Chinese groups, to the benefit of the companies in which the fund invests, as illustrated by the landmark investments in Club Med as well as in Bang & Olufsen. Cornerstone investors of A CAPITAL are the Chinese sovereign wealth fund China Investment Corporation (CIC) and the Belgian Holdings SFPI. Copyright A CAPITAL 2013 Page 18