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Chinese Firm Takes Stake in U.S. Investment Bank Cowen

Chinese Firm Takes Stake in U.S. Investment Bank Cowen

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 which 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 (3/28) — 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.

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