In the news: MOFCOM clears Shell-BG deal, Alibaba buys SCMP and Volkswagen gets sued by Chinese NGO
December 15, 2015 | BY
Katherine JoThis week the Shell-BG merger received its final regulatory approval in China, Alibaba bought the Hong Kong newspaper for $266 million, an environmental group filed a case against VW and China's two largest shipping SOEs combined
Royal Dutch Shell's acquisition of BG Group, which was announced on April 8 and is the biggest in the sector in a decade, has been approved by China's Ministry of Commerce (MOFCOM). The deal has already been cleared in Australia, Brazil and the EU, and transforms Shell into the world's top LNG trader and a major offshore oil producer focused on Brazil's rapidly-developing sub-salt oil basin that rivals Exxon Mobil, the largest international oil company. Shell announced it may cut about 2,800 jobs globally from the combined group. This $70 billion deal makes the combined group the biggest LNG supplier to China, and was cleared without any conditions. Many had predicted that the group should be prepared for remedies, but the Shell CEO had apparently met with the MOFCOM president to discuss the deal. Sources warn, however, that China can use this to leverage long-term gas supply contracts.
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Alibaba Group Holding agreed to buy Hong Kong's South China Morning Post and other affiliated media assets for HK$2.06 billion ($266 million). Alibaba said last week it will scrap the publication's internet paywall and strictly leave decisions related to content to the editors. Slaughter & May is advising Alibaba and Norton Rose Fulbright is representing SCMP. Media have been quick to say that the Hong Kong newspaper, which has been vocal about the Occupy Central protests and commemorates the Tiananmen incident every year, may undergo a change in tone as it falls into the hands of a Chinese company. Alibaba has said it will leave editorial decisions out of the boardroom. But political concerns aside, this is clearly more of a commercial move on Alibaba's part to further expand its presence both on and offline, and really become a conglomerate.
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A Chinese environmental group said it has sued Volkswagen AG over its use of software to rig emission tests. The China Biodiversity Conservation and Green Development Foundation filed the suit in a Tianjin court, claiming that VW produced problematic vehicles to obtain higher profits, circumvented Chinese laws, worsened air pollution and affected public health and rights. This marks the first public interest lawsuit related to pollution from automobile exhaust. The group said it will pursue more cases to prevent automakers from “cheating”, but the damages will have to be high to have a deterring effect. In 2014, the PRC Environmental Protection Law (amended for the first time since 1989) permitted registered NGOs to file lawsuits against polluters and the Supreme People's Court established its own environmental tribunal. The government is also preparing for an environmental tax system and has strengthened environmental criteria for projects. Against these legislative developments, this high-profile case is a good starting point for the courts.
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The State Council has given the China Ocean Shipping Co. (COSCO Group) and China Shipping Group Co., the country's two largest shipping conglomerates, the go-ahead to merge as part of a trend to trim down sprawling SOEs. The latter will become a financing company for the industry and hand over all its shipping assets to COSCO. The new entity will be headquartered in Shanghai and will be called China COSCO Shipping Group. It will be the world's fourth-largest container operator by capacity after Denmark's A.P. Moeller-Maersk A/S, Switzerland's Mediterranean Shipping Co SA and France's CMA CGM SA, Alphaliner. The deal is expected to be messy – it involves integrating sales networks, reorganizing shipping routes and transferring assets owned at domestic and foreign ports. The reform continues as we have already seen consolidation in SOE-heavy industries like railway and resources. There are more to come, but it will take some time for these new and leaner entities to propel economic growth.
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