China Energy Co. Ltd. (CEFC) is lending $175 million to investment bank Cowen Group (COWN) as part of joint venture that will give CEFC a 19.9% piece of Cowen and pay to restructure some of Cowen's debt.
Cowen will raise $100 million in a private-investment-in-public-equity offering purchased by CEFC.
"We believe the synergies brought by this strategic partnership can create significant value for our clients and for our respective stakeholders and further promote a deepened cooperation in a number of areas within the U.S. and global capital markets," CEFC chairman and founder Jian Ming Ye said in a Thursday release.
A deal note provided by Instinet LLC analyst Steven Chuback also saw positives in the deal.
"This announcement provides additional firepower for COWN to pursue larger-scale acquisitions and better leverage its fixed-cost base," the note said.
"In terms of the broader landscape / implications for other broker-dealers, we could see similar takeout interest from other foreign buyers looking to expand to the U.S. while still retaining greater control / board seats," the note said.
"Other potential targets cited by investors include Piper Jaffray, JMP Group and Stifel."
Not everyone is so optimistic.
"China Energy as an investment bank investor on the surface level seems completely out of context and certainly scope," Dan McClory, head of china and equity capital markets at Los Angeles-based Boustead Securities, told TheStreet.
"It's even more surprising given the current prohibitions that the PRC has placed on Chinese companies embarking on international M&A in areas unrelated to their core businesses. I am sure we will learn and see more soon which will allow us to better understand the synergies. For now, we are pleasantly puzzled," McClory said.