Xinmao Draka cable bid puts Tianjin suburb on map

By Terril Yue Jones

TIANJIN, China (BestGrowthStock) – Traffic weaves lazily through a Chinese industrial park lined with imposing buildings — home to the company that is outbidding the world’s top two cable companies for Dutch industry player Draka.

Many of the edifices bear the name “Xinmao,” the Chinese company that burst onto the international scene this week with its surprise 1 billion euro ($1.3 billion) bid for the Dutch manufacturer of elevator and construction cables and fiber optics.

Before its audacious cash bid, which trumps an agreed takeover by Italy’s Prysmian and an earlier failed one by Nexans of France, Xinmao was little known abroad — or in most of China for that matter.

With no track record of international acquisitions, its attempt to snare Draka has raised questions over how it can pull off a $1 billion-plus acquisition. But with Draka shares about 5 percent shy of its proposed bid price, investors are betting it has a good chance.

Xinmao, formed 10 years ago and with a workforce of about 30,000, is a household name in Tianjin, a sprawling port city of more than 12 million about 100 kilometers southeast of Beijing.

People interviewed on Friday outside its headquarters described an admired local brand that looms large in its hometown.

“Xinmao is a big, powerful company. Everybody in Tianjin knows it,” says Teng Peng, 40, who works for a Xinmao subsidiary that makes electricity converters.

Like many entrepreneurial Chinese businesses, Xinmao runs a range of operations. Eight science and technology parks, engineering services, wind power, defense, and information technology figure among nearly 30 businesses.

According to public documents, company Chairman Du Kerong, a military officer-turned-entrepreneur, and his daughter own 90.6 percent of the company. In 2005, Xinmao conducted a back-door listing on the Shenzhen exchange, buying a listed company and injecting some of its assets.

Local media reports say Du, a former senior officer in China’s air force, founded the parent company, Xinmao Group.

After leaving the military he went to work for a Tianjin-based import-export company before starting his own construction business. That business eventually became part of Xinmao Group.

Company officials were not available for comment.

Xinmao’s presence is big in this industrial zone. At one end of the park is a towering Xinmao-owned hotel. Nearby is Changfei Xinmao, a year-old optical fiber JV that attests to the relationship Xinmao and Draka already have: Draka is Changfei’s main shareholder.

Xinmao’s campus comprises 17 buildings, home to it and some 900 other companies that have purchased office space here.

In the view of some locals, Xinmao can do no wrong.

Xinmao is an “honorable name,” said both Gang Xiaonan, 31, and Li Yan, 30, who works for an architectural design company that purchased office space in a Xinmao building. On hearing of the attempt to acquire Draka, Gang’s eyes widened.

“I’m going to buy some Xinmao stock today, maybe 1,000 shares,” she said, rattling off Xinmao’s listed subsidiary’s Shenzhen Stock Exchange ticker from memory: 000836.

“Their stock price won’t go down,” she gushed. “Look, their business is right here in front of us, not something on the Web,” she said, pointing to buildings up and down the street. “My money won’t be wasted.”

(Additional reporting by David Lin; Editing by Don Durfee and Andrew Callus)

Xinmao Draka cable bid puts Tianjin suburb on map