HONG KONG — As China looks to spread its economic influence around the world, it is taking a bigger interest in financial companies, a move that could raise scrutiny in the era of President Trump.
In the latest deal, CEFC China Energy, a Chinese conglomerate with big investments in oil in Central Africa, agreed on Wednesday to buy a stake in a century-old New York boutique investment bank, the Cowen Group.
For Cowen, the deal brings an injection of cash and debt financing and the promise of better access to the Chinese market. CEFC gets a ready-made springboard into high finance in the United States.
It is the latest example of surging amounts of Chinese investment targeting overseas companies, especially American ones. Chinese firms made 173 deals targeting American businesses in 2016, according to data compiled by the research firm Dealogic, for a total value of $67.8 billion, more than the total for the six previous years.
But the strategy is not a sure bet. Previous attempts by Chinese companies to penetrate American financial services have come under regulatory scrutiny or struggled to generate hoped-for financial returns, though Cowen’s chairman, Peter Cohen, said he viewed his deal as “pretty benign” from a regulatory standpoint.
A decade ago, the China Investment Corporation, China’s sovereign wealth fund, bought a stake in Morgan Stanley, a deal that signaled a shift in the investment strategy of organizations with links to the Chinese government away from domestic acquisitions to overseas purchases.
And just last month, Deutsche Bank disclosed that the HNA Group, a private Chinese firm that invests in airlines and hotels around the world, had acquired a 3 percent stake worth about $1 billion at current share prices. In January, HNA acquired the investment business SkyBridge Capital from Anthony Scaramucci, who was being considered at the time for a job as a business adviser to Mr. Trump but did not get the position.
But the Trump administration’s stance on such investments could be tested by an apparent bidding war for MoneyGram, the American payments processor. Among the bidders for the company is Ant Financial Services Group, the PayPal-like online payment company spun out of Alibaba in 2014. But a rival company, Euronet Worldwide, has said that its competing offer for MoneyGram would not require as strict a regulatory review as Ant’s bid.
Cowen, a small but growing investment bank founded in 1918, said on Wednesday that it had agreed to sell a 19.9 percent stake in itself to CEFC. The deal includes the sale of the stake — priced at $100 million, equivalent to a 29.5 percent premium to Cowen’s closing price on the Nasdaq on Tuesday — as well as a separate agreement by CEFC to extend debt financing to Cowen worth $175 million.
The two companies said in a statement that they wanted to use complementary areas of expertise and geographical focus to expand Cowen’s core equity, research and investment banking businesses.
The purchase requires regulatory approval and the green light from the Committee on Foreign Investment in the United States, a panel composed of representatives from major American government departments and intelligence agencies like the Treasury and Justice Departments and the C.I.A.
Cowen executives said that because the deal involved only a minority stake and was focused on financial services, not normally seen as a sensitive industry, they were confident it would pass muster with American regulators.
“We’re not a defense contractor or technology business or chip maker,” Mr. Cohen said in a telephone interview from Shanghai. He said because CEFC would take a minority stake, the management of Cowen would retain “complete autonomy in the day-to-day running of the business.”
CEFC has risen rapidly in Chinese energy and finance — two industries dominated by government interests — since it was founded in 2002 by Ye Jianming. Currently the firm’s chairman, he started the company when he was still in his 20s.
CEFC, which is privately held, is No. 229 on the Fortune Global 500 list of the world’s biggest companies, with revenue of over 220 billion renminbi, or $33 billion, in 2015 and over 30,000 employees.
Mr. Ye regularly meets with foreign heads of state. CEFC’s overseas energy deals are promoted in official Chinese news media as helping to carry out state-directed investment programs like President Xi Jinping’s “One Belt, One Road” strategy of infrastructure and related investments across Central and Southeast Asia.
Mr. Ye was also the chairman of the China Energy Fund Committee, a unit of CEFC China Energy. The committee organized a series of conferences on energy and military affairs in Hong Kong several years ago, attracting well-known retired American admirals and generals, as well as hawkish senior officers from the Chinese People’s Liberation Army.
Continue reading the main story
