Saturday, June 25, 2005

The great Chinese brand chase

... has just begun. Barron's also had a piece on this topic today.

While dumb legislators may try to prevent takeover of US brands by Chinese firms, they are better off allowing this natural process to continue. After all, the cash for all these offers comes from China's huge foreign exchange reserve, which ofcourse is money that US consumers paid for all those goods stocked in Walmart! This recycling is preferable to other alternatives.

Who next, after Maytag, IBM's laptop business ?

One possible candidate is Radioshack (RSH). With a market cap of $3.7 billion, this is a small target, even if a decent premium is paid. I do not own any shares, but will be a buyer at its current price.

Toymakers, Mattel (MAT) and Hasbro (HAS), are also likely to attract attention from Chinese buyers.

The Koreans are likely to indulge in a similar chase too. Unlike the Japanese, who burnt their fingers buying up every available movie studio and golf course in California, the Koreans never managed to misuse their cash. They have to, at some point! There was speculation recently that Samsung could go after someone like AMD. That seems unlikely, but if the Koreans start buying, it will likely show up in the chip, memory and cell phone and related consumer electronics sectors. Buyouts of smaller game producers is also a real possibility.


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