Gide Loyrette Nouel (GLN) has wrapped up another wine house acquisition in what the firm sees as a definite trend from Chinese investors towards prestigious French chateaus.
GLN advised King Power Group, a Hong Kong retail conglomerate, on the acquisition of Château Bernadotte from Château Pichon Longueville Comtesse de Lalande, part of the renowned Champagne Louis Roederer group.
GLN’s lead partner in the deal, Guillaume Rougier-Brierre, is an M&A expert who spent four years in the firm’s Beijing office before returning to Paris in 2009. He told China Business Law Journal wine deals are becoming popular for several reasons.
“First, part of Bordeaux is in a ‘selling’ trend; second, Chinese investors are in a buying mood (we have several other transactions for reputable Chinese buyers in the pipe); third, they are looking for prestige – France has always been associated with luxury and some wines and spirits have now become real luxury products; and fourth, they have a great business case for selling greater volumes at higher price in China the wines bottled in France.”
The GLN team has advised on other major transactions involving the viniculture sectors in France and China, including assisting the Chinese agribusiness group COFCO with its acquisition in 2011 of Château de Viaud, an appellation d’origine contrôlée vineyard in the Bordeaux region, and advising Domaines Baron de Rothschild on a partnership with China’s CITIC bank, in the Shandong region, for the launch of a local fine wine.
Rougier-Brierre said the deal was similar to COFCO’s acquisition in 2011. “We capitalised on the experience gained with COFCO. Now maybe a bit easier, since we were dealing with a private company and not a state-related conglomerate.
“This is a real wine transaction, not a real estate deal. It fits into the corporate strategy of King Power.” Rougier-Brierre said these types of transactions vary, depending on the existing or non-existing ‘offshore’ set-up of a Chinese buyer. “As per regulatory framework in China [not applicable for Hong Kong], a China company needs the approval of Chinese authorities – NDRC, MOFCOM, SAFE – to invest abroad, i.e. to buy shares offshore, or set up an offshore vehicle to buy shares, and to finance both, i.e. to transfer funds from China to offshore.
“The approval process of Chinese authorities is often kicked off late upon signing of an SPA [share purchase agreement], as Chinese buyers often do not want to start it earlier for local PRC reasons, or because they are not sure to get the deal. All sellers are frightened about the outcome of this process and sometimes reluctant to sell to Chinese investors, just because of that.
“If a Chinese buyer already has a fully approved offshore set-up, the negotiation will be easier. If not, you should cross fingers and hope that the seller is waiting for you. The only way to overcome this challenge is to anticipate the process to an earlier stage of the deal, i.e. on the basis of an offer, but that requires the PRC investors to manage that locally in the PRC.”