BUYOUTS: Youku Bids Adieu to NY, Wanda Properties Eyes HK Exit

Bottom line: A flurry of new de-listing activity shows that well-funded privatizations will continue despite market volatility in China, and could also spread to undervalued private companies listed in Hong Kong.

Wanda Commercial Properties eyes buyout

The headlines are brimming with new moves in the buyout wave that has swept over off-shore listed Chinese stocks, which are privatizing in droves due to disappointing valuations. Leading the news are 2 former high-flyers, online video site Youku Tudou (NYSE: YOKU), which has formally completed its buyout by e-commerce giant Alibaba (NYSE: BABA); and property giant Wanda Commercial Properties (HKEx: 3699), which has announced it is exploring a potential buyout less than 2 years after its Hong Kong IPO.

That pair are joined by 2 smaller stories involving ongoing privatizations by budget hotel operator Homeinns (Nasdaq: HMIN) and the shriveling Ku6 Media (Nasdaq: KUTV). Media are saying that Homeinns has already lined up a Chinese listing vehicle to resume its life as a publicly traded company after it de-lists from New York. And Ku6 has announced it has formally signed a buyout agreement that will result in its own de-listing.

Among these 4 stories, the most interesting is Wanda Commercial’s, as it’s one of the first buyout offers I’ve seen outside New York, coming for a Hong Kong-listed company. It also falls squarely outside the high-tech realm that is home to many privatizing companies, and hints that the de-listing wave could soon spread to more traditional sector private Chinese companies that are mostly listed in Hong Kong.

Wanda Properties listed in Hong Kong just 15 months ago, selling shares for HK$48 apiece. The stock posted huge gains in its first few months in tandem with China’s soaring stock markets, but later tanked and was trading about 25 percent below its IPO price when it announced a plan to potentially privatize.

Under that plan, Wanda says its controlling shareholder would pay at least HK$48 for each of the company’s publicly listed shares in Hong Kong. (company announcement; Chinese article) The company’s shares have rallied since the announcement to just over HK$45, meaning investors are fairly confident that Wanda Group’s billionaire founder Wang Jianlin has the resources and determination to privatize his company.

Youku Shares Suspended

Next there’s Youku Tudou, whose de-listing hasn’t ever really been in doubt since the cash-rich Alibaba announced a plan to buy the company last year. Youku Tudou shareholders approved the deal last month, and now the company has announced the buyout has been formally completed. (company announcement) As a result, Youku Tudou has requested a suspension of its New York-listed shares, and a de-listing should probably be complete in the next few weeks.

Then there’s Homeinns, which announced its privatization plan last year and now looks set to post a record for the shortest interval between its New York de-listing and a re-listing in its home China market. Media are reporting the budget hotel operator has selected an existing China-listed hotel company, BTG Hotels (Shanghai: 600258) as its new listing vehicle. (Chinese article)

This deal actually looks more like a merger than an actual backdoor listing, since BTG will still hold 65 percent of Homeinns after the latter injects its assets. The report in China Business Network says Homeinns’ current management will remain at the new company, though it does look like there will be some big adjustments as the 2 companies are merged. In this instance Homeinns looks like the larger company with a market value of about $1.7 billion, while BTG is about half that size at about 5 billion yuan ($800 million).

Last there’s Ku6 Media, whose story really only deserves a quick mention due to its small size. The company said it has entered a final deal that will see its shares purchased for $1.08 apiece, in a deal that seems almost certain to close due to its small size valued at around $50 million. (company announcement; Chinese article) That will bring an end to a public listing that dates back more than a decade, in a move that is somewhat sad but also should have come much earlier for this directionless company.


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