The
approval by Chinese regulators of Pfizer Inc.'s (NYSE:PFE) $68 billion merger with Wyeth (NYSE:WYE) earlier this week offers another glimpse into just how open China will be to foreign investment under its
new anti-monopoly law. The conditional clearance -- under which Pfizer will have to divest certain animal health assets in China -- was the fourth deal to come before the Chinese regime under regulations that took affect in August 2008.
"I don't think there was any contemplation that this would be anything but a straight-up clearance," says former Federal Trade Commission General Counsel Bill Blumenthal, who now chairs the antitrust group at Clifford Chance and helped
advise Pfizer through the approval process.
That's despite the fact that Chinese regulators have flexed their muscle in other deals. In March, China
scuttled
Coca-Cola Co.'s (NYSE:KO) $2.4 billion bid for China Huiyuan Juice
Group Ltd. The deal, of course, involved a beloved national brand with plans to expand aggressively, and there was plenty of speculation that these factors weighed heavily in the Ministry of Commerce's rejection of Coca-Cola.
The other two deals that have been reviewed under the new rules are InBev SA's $52 billion acquisition of Anheuser-Busch Cos. and Mitsubishi Rayon Co. Ltd.'s $1.6 billion acquisition of Lucite International Ltd. Neither deal involved a Chinese firm and both cleared, though the Mitsubishi, Lucite deal was delayed by a lengthy regulatory review.
"There was a bit of consternation at the time that the U.S. and EU had already approved the deal, and the Chinese held it up," says Blumenthal, who adds, however, that a more thorough look at the details would have revealed a "good faith application of competition laws. There was no meaningful overlap of the physical location of the plants in the U.S. or Europe. That was not the case in China."
Meaning it's just as likely that the U.S. or EU would have conducted more lengthy reviews given a similar set of factors to consider.
In a nationalistic country that also has a big corruption problem, it would be naive to think protectionism couldn't influence the decisions of regulators reviewing M&A, even in deals that don't involve a homegrown firm.
But while the instinct will be to blame nationalism for any rejections or delays, says Blumenthal, it's more likely that there are other interests at play from a difference on standards to the steep learning Chinese regulators face in reviewing mergers in a nascent antitrust regime.
"The prospect that you can parachute somebody in and have them operate with the same level of sophistication and skill as people who have been [reviewing deals] for 30 years isn't realistic."
As for the Pfizer-Wyeth merger, the EU and Australian Competition and Consumer Commission have also granted clearance. The highest regulatory hurdles, however, those in the U.S., are still ahead. - Suzanne Stevens
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