China’s State-Owned Companies Must Pay For X-Border Deals

Shougang Group, a state-owned steel company in China, is reportedly on the hunt for assets to purchase that are outside of its main business and its country.

According to a report in The Financial Times, the steel company in China started working with bankers and lawyers in May to potentially make a bid on Q-Park, a Netherlands car park operator that may land more than $2.4 billion in a sale. Shougang may also be looking to make a bid for Indigo, a French car park company that is expected to get $4.3 billion in sale.

According to the report, Shougang is a rare example of a state-controlled metals company that is looking to make purchases outside of its core business. For the Chinese company, making a purchase in Europe may be more costly than previously thought because of rising legal fees and offshore financing rates from banks.

“Regulations can change rapidly in China. There have been lots of changes over the past six months,” said Jay Ze, a partner at Eversheds Sutherland and head of the law firm’s corporate practice in China, in the report. “At the start of a transaction, you need to be able to fully inform the clients on what regulation looks like and what their options are.”

The report noted that in recent months the M&A options for Shougang have been reduced with the Chinese government trying to limit the amount of capital that is leaving the country partly from cross-border mergers and acquisitions. That has resulted in a tougher timing gaining government approval for deals, noted the report. What’s more, deals with companies going after assets outside of their core has seen a clampdown, with regulators fearing those deals are just costly ways to move the wealth out of the country, reported The Financial Times.