CFIUS and Censorship Aren’t the Only Threats to China, US M&A – TheStreet.com

On Nov. 4 when China's Dalian Wanda Groupannouncedit would shell out $1 billion to acquire Dick Clark Productions, the real estate conglomerate thought it had just landed another marquee entertainment company forits growing coffer of U.S. assets that already includes cinema operator AMC Entertainment Holdings (AMC) and film-production company Legendary Entertainment.

But bubbling under the surface of the deal for theAmerican Idol producer was concerns from investors, regulators and entertainment executives in the U.S. and abroad about the deal's viability. Specifically from the typical CFIUS or censorship concerns that normally occur when Chinese buyers target U.S. companies.

"Most of the leaders of China's entertainment industry are here in Los Angeles this week, and there are discussions between them about the concerns in Washington," Rob Cain, a Los Angeles-based film producer and entertainment-industry consultant to Hollywood studios operating in China, told the Wall Street Journal at the time.

And those concerns have proven well-founded, because on March 10, Eldridge Industries, which owns the production studio, said that it had terminated the deal after Beijing-based Wanda "failed to honor its contractual obligations."

But the collapse of Dalian Wanda's $1 billion deal to buy Dick Clark Productions could actually signal a future where U.S.-China deals are increasingly difficult to consummate. And that's because of concerns about the outflow of cash from mainland China overseas.

"It is very likely that 2017 will represent a very difficult year for any outbound China deals to get done. This is due almost exclusively to the increased capital controls," said Christopher Balding, associate professor of finance and economics at the HSBC Business School of Peking University Graduate School. "Beijing has simply been cracking down on capital leaving China so that even many non-investment currency transactions are unable to obtain clearance for international transactions of any kind."

See the article here:
CFIUS and Censorship Aren't the Only Threats to China, US M&A - TheStreet.com