Can Arc’teryx’s owner revive Chinese IPOs in America?

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Fforeign acquisitions by Chinese buyers have a bad reputation. The takeover of PizzaExpress, a British restaurant chain, by Hony Capital, a Chinese private equity firm, has resulted in a restructuring. Forced financial collapse HNA, a Chinese conglomerate, to sell its stake in Hilton Worldwide, an American hotel chain, shortly after purchasing it. Sanpower, a Chinese mall operator that bought House of Fraser, a British department store, succumbed to similar pressures.

One exception is the 2019 €5.6 billion ($6.3 billion) purchase of Amer, the Finnish owner of brands including Arc'teryx, Salomon and Wilson, by a consortium led by Anta Sports , a Chinese rival to Adidas and Nike. The previous year, increased competition in the sporting goods sector had virtually wiped out Amer's revenue growth. During the first nine months of 2023, sales increased almost 30% year-over-year; a fifth came from China. Bankers hope that after scoring a victory in takeovers of Chinese foreign companies, Amer can do the same for Chinese foreign listings. On January 4, Amer filed for an IPO (Initial Public Offering) on the New York Stock Exchange.

image: The Economist

A few years ago, when Chinese companies were raising billions from foreign investors, this would have been easy. Now all you have to do is perform a cross-fit champion loop. In the West, politicians take a dim view of trade ties with China. At home, economic growth may see a long-term decline and President Xi Jinping is becoming more ideological. Investors fear a repeat of Didi Global, a Chinese ride-hailing giant: in 2021, days after its $4.4 billion New York debut, it was investigated by its regulators nationals, lost much of its market value and was eventually forced to delist. Initial Public Offering Activity in Hong Kong, once the main offshore venue for such listings, is slow. In America, it's worse. In 2020 and 2021, Chinese companies raised a total of $27 billion in New York. Over the past two years, they have raised $1 billion (see chart).

Amer hopes to reap as much on his own. The company is in an ideal position for foreign investors, says a banker. It is controlled by Anta, but most of its assets are located abroad. Its headquarters remained in Helsinki. Retail is deemed immune from the whims of Chinese regulators. Having sewn sneakers for Nike in the 1990s and eclipsing its former client as the world's largest sportswear company by revenue, Anta is considered a national champion – and therefore even safer. Salomon skis and Wilson tennis racquets aren't the kind of strategic equipment to get the Chinese hawks' pulses racing (other than literally).

Many globally curious Chinese stars would like Amer to succeed. Among them are Ant Group, a fintech giant whose $37 billion Initial Public Offering in Hong Kong was halted by regulators at the end of 2020; ByteDance, the owner of TikTok, backed by KKR, an American investment company, and SoftBank, a Japanese company; and Shein, a super-fast fashion company that has filed for approval Initial Public Offering in America under pressure from American investors such as General Atlantic, but could only go public after Amer. Didi will also one day have to re-list its shares in Hong Kong. Foreign backers of these companies need them to list their shares overseas to avoid trapping profits under China's strict capital controls. They will look at Amer Initial Public Offering closely.

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