WSJ x Capital in English

ChinaDie rätselhafte Übernahme von J.D. Power

Wolkenkratzer in Hongkong
XIO hat ein Büro im International Commerce Centre in Hongkong

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A plan for the sale of the car-rating business J.D. Power was a month old when the seller, New York-based information giant S&P Global Inc grew uneasy. It wasn’t quite sure to whom it had agreed to sell the company.

“I wanted to raise a point with you that is causing our team here some concern,” S&P Global executive Jason Gibson wrote on May 19, 2016, to the purchaser, a firm called XIO Group that had been set up in Hong Kong and was planning to do the deal through an offshore private-equity fund. Mr. Gibson emailed that he hadn’t received information he expected about who owned XIO and where it was getting the money for the purchase.

The sale went through. XIO acquired J.D. Power four months later for $1.1 billion. The deal left a U.S. company famed for enhancing transparency—shining a light on the automotive and other industries—owned by a private company that was soon embroiled in a largely hidden dispute in China over its funding.

Most XIO employees knew little about where its funding came from. Some advisers to XIO received differing accounts.

The J.D. Power deal was completed amid a wave of overseas acquisitions by cash-rich, privately owned Chinese companies. Some of them have unclear ownership structures that bankers and lawyers say can be a source of confusion. XIO provided full details of its investors to everyone involved in the U.S. regulatory approval process for J.D. Power, a spokesman for XIO said.

Purchases of foreign assets by Chinese companies exploded in 2016 to a record $217 billion. Though China’s government has sought to rein these in, the buying continues, at a slower pace.

XIO was among the new buyers Western bankers and lawyers started hearing about. A year after it was founded in Hong Kong, XIO opened its headquarters office in London’s Shard skyscraper in 2015. A Shanghai-based fund company called Shanghai Li Hong Investment Center invested hundreds of millions of dollars from mainland China in one of XIO’s acquisitions, according to a public document at China’s Ministry of Commerce. XIO controls Shanghai Li Hong, the XIO spokesman said.

XIO quickly developed the capacity to do billion-dollar deals. Yet its executives and a billionaire Chinese tycoon are fighting over its assets in lawsuits in two jurisdictions, with details hidden from public view.

“Beneficial ownership of companies is difficult to understand in China,” said Bruno Raschle, vice chairman of Zurich-based private-equity firm Schroder Adveq. “You never know who is really behind a company—an individual or the government—or sometimes the government using individuals or making use of individuals.”