At a time when caravans of affluent Chinese buy homes in the U.S. with cash, the nation's corporate overseas buying spree continues with a new level of global mergers and acquisitions knowledge and sophistication.
But unlike a real estate deal, cross-border M&A demands harder work after the transaction is completed.
There's no exception for China's Zhongding Sealing Parts Co. Ltd., which is buying two plastic and rubber molding subsidiaries from Akron, Ohio-based Myers Industries Inc. for $8.5 million.
The net assets of Buckhorn Rubber Products Inc. and Michigan Rubber Products Inc. are valued at $14 million.
While Myers — which is traded on the New York Stock Exchange — has yet to release details of the deal, Zhongding — which is listed on the Shenzhen Stock Exchange — has issued a statement detailing financial terms, risk assessment, future strategies, and more.
According to the statement, while Zhongding will take over Buckhorn Rubber and Michigan Rubber's fixed assets — such as land, buildings and machinery — the real targets are the less tangible ones: brands, technologies, management and, especially, customer base. As Zhongding noted, the rubber businesses are Tier 1 suppliers to the Big Three automakers.
Zhongding plans to shift some U.S. manufacturing to China. However, it will endorse the “Made in USA” business model at large, which will help bolster profitability in North America and avert trade disputes.
After the Myers deal closes, Zhongding will face the challenge of reorganizing U.S. subsidiaries and integrating their branding, supply chain and management into the company's global system.
Zhongding has stated that it will try to retain core technical talent at Buckhorn Rubber and Michigan Rubber, but is not obligated to keep all employees. The 217 workers at Michigan Rubber and 127 employees at Buckhorn Rubber are not unionized, the company pointed out.
Zhongding is no stranger to U.S. M&As: In 2008, it bought Strasburg, Ohio-based auto supplier Allied-Baltic Rubber Inc. for $4.5 million and renamed it Zhongding USA Inc.
The stark contrast I see between Zhongding's 2008 and 2009 acquisitions is that Allied-Baltic had been losing money for two years in a row, but Buckhorn Rubber and Michigan Rubber are profitable.
I believe Zhongding is playing its cards right. Still, challenges are ahead in the process of restructuring, including: standardizing systems within a multinational company; delegating decision-making and performance responsibilities in different regions and units; managing local and expatriate workers and ensuring their company loyalty and productivity; and bridging the cultural divide.
The one certain thing is that Chinese companies are becoming more mature and Westernized through international M&A activities.
Sun is a Plastics News assistant managing editor and author of “The China Blog.”