FUND RAISING: Bona Film Cashes Out of NY, LightInTheBox In Shoe Tie-Up

Bottom line: A new strategic investment in LightInTheBox by a major shoemaker is a vote of confidence in its turnaround story, while Bona Film’s buyout offer caps a week of record privatization activity for US-listed Chinese firms.

LightInTheBox gets new strategic partner

Last week’s privatization frenzy for US-listed Chinese firms saw one more company join the queue on the final day of the week, with movie maker Bona Film (Nasdaq: BONA) adding its name to the list of companies looking to end their relationship with fickle New York investors. That final offer brought the number of US-listed Chinese firms receiving buyout offers last week to 5, which must surely be a record for such bids in a single week.

Meantime, another interesting deal has seen underperforming e-commerce company LightInTheBox (NYSE: LITB) receive its own big new investment from one of China’s leading shoemakers. That deal saw Aokang Shoes (Shanghai: 603001) buy about a quarter of LightInTheBox’s shares, hinting at a major new direction for the foreign-focused e-commerce company and also implying it’s unlikely to de-list from New York anytime soon.

Let’s begin with the LightInTheBox-Aokang story, as I’ve gotten a little tired of writing about all the privatization offers that are suddenly rolling in for New York-listed Chinese firms. I’m not a close follower of LightInTheBox, but I do like the fact that it’s a bit different from China’s other e-commerce companies because its business model targets foreign buyers for cheap Chinese goods.

The company rose to prominence making cheap wedding dresses and other women’s wear for western buyers. But it was running into problems due to logistical bottlenecks involved in shipping its products from China to the US, where most of its customers were located. The company reported a net loss in its latest quarterly results, but is making major new investments recently to build up its US-based logistics capabilities that are showing early signs of good results. (previous post)

Against that backdrop, this latest investment from Aokang looks like a vote of confidence in LightInTheBox’s business model and future prospects. The deal will see Aokang acquire nearly 26 percent of LightInTheBox through the purchase of its American Depositary Shares (ADSs) at $6.30 each. (company announcement) LightInTheBox shares surged last week after the deal was announced, gaining as much as 33 percent from their previous levels.

The deal will provide LightInTheBox with a major new product line, in the form of Aokang’s extensive offerings of women’s shoes. Aokang will also presumably offer those shoes to LightInTheBox at preferential prices, which could help to propel the e-commerce company back into the profit column. We’ll have to wait and see if all of LightInTheBox’s efforts finally start to bear fruit with a return to profitability, but this latest investment and its earlier drive to improve its logistics management certainly look like encouraging signs.

Next there’s Bona Film, which once looked like a promising bet due to its position in the fast growing China film market and also an earlier investment by Rupert Murdoch’s Twenty-First Century Fox (Nasdaq: FOX). (previous post) But then Bona fell into the red, reflecting the fickle nature of the film business, and its shares have largely languished over the last 2 years despite its more recent return to profitability.

Under its new offer, the buyout group would pay $13.70 for each of Bona’s ADSs, representing a 24 percent premium to their price over the last 30 trading days. (company announcement) Unlike many of the previous buyout offers, which didn’t clearly state any financial backers, this particular bid has 2 major backers, Shanghai-based private equity firm Fosun International (HKEx: 656) and the China arm of Sequoia Capital.

Bona’s buyout offer ended a banner week that saw similar bids come during the week for hotelier Homeinns (Nasdaq: HMIN), online real estate firm E-House (NYSE: EJ), data center operator 21Vianet (Nasdaq: VNET) and social networking site Renren (NYSE: RENN). All had seen their shares languish in New York, and are hoping to re-list in China to capitalize on more bullish sentiment there. I expect last week probably marked a peak in this current buyout wave, but we could still see a few more new offers in the next few weeks.

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