Bottom line: Focus Media could make a bid for Sina’s core web portal assets within the next year, following their co-investment in a fashion public relations specialist.
Sina, Focus Media invest in Bazaar
It’s a relatively slow time during the final dog days of summer here in Beijing, so I thought I would zoom in on an interesting new investment in a company called Bazaar Energy, which bills itself as a “fashion public relations solutions provider.” But what’s most interesting about this investment isn’t the company receiving the money, but rather the pair of companies providing the funding.
In this case it’s the pair of leading web portal Sina(Nasdaq: SINA) and outdoor media firm Focus Media (Shenzhen: 002027) that are providing the money, which appears to be quite a modest sum. This particular pairing is interesting less for the target company, and more because it brings together a pair of investors that were once intending to merge. Much has happened since that merger plan fell apart, and this new pairing raises the slim but still interesting prospect that this pair of companies might attempt to relaunch that plan. Read Full Post…
Bottom line: The CSRC’s reported plans for a backdoor listing quota for companies returning to China from New York should restore confidence that well-conceived buyout plans by big names like Qihoo will succeed.
Regulator reopens gate for backdoor listings in China
After a massive sell-off at the beginning of the week on concerns of a major new roadblock to their homecoming plans, Chinese companies privatizing from New York have seen their shares rebound sharply on reports of a regulatory compromise that would allow them to re-list in China. The story is mostly based on rumors about an internal debate within the China Securities Regulatory Commission (CSRC), China’s stock regulator, which is worried about a potential future flood of backdoor listings by local companies now privatizing from New York.
The sell-off for companies like Qihoo (NYSE: QIHU), Momo (Nasdaq: MOMO) and 21Vianet (Nasdaq: VNET) at the start of this week came after reports emerged saying the CSRC might halt all such backdoor listings, which typically see a company inject its assets into an existing listed shell company. The regulator took the unusual step of saying it was simply studying the issue, but that didn’t ease concerns that New York privatization bids for Qihoo and others might collapse if backdoor re-listing route in China was closed. Read Full Post…
Bottom line: Many privatization bids by Chinese firms hoping to re-list in China could collapse if the CSRC cracks down on backdoor listings, though de-listing plans backed by big private equity names could still succeed.
Privatizing shares tumble on CSRC rumors
Rumors that they might get a chilly reception from China’s securities regulator has sparked a major sell-off for shares of US-traded companies trying to privatize and re-list at home in search of higher valuations. The dive is one of the largest I’ve seen for any single group in quite a while, and could present a great buying opportunity for anyone who believes these companies can still successfully privatize and re-list in China.
But in this case I might be more inclined to agree with the pessimists, since China’s securities regulator is quite conservative, even though I’ve said it should continue to allow these re-listings. (previous post) In this case the China Securities Regulatory Commission (CSRC) may also be acting under direct orders from Beijing, which is already worried about another major sell-off on domestic stock exchanges like one early this year. Read Full Post…
Bottom line: The CSRC should take steps to better regulate backdoor listings by Chinese companies privatizing from New York to ensure market stability, but shouldn’t ban the process completely.
CSRC weighs closing backdoor listings
Chinese companies planning to re-list at home after disappointing results with overseas IPOs got some troublesome signals last week, when rumors emerged that China’s securities regulator might be planning to slow or halt a mechanism that has quickly become the preferred route for such homecomings.
That mechanism has seen newly privatized companies make back-door listings using Shenzhen- and Shanghai-traded firms that are often just shells of former state-run enterprises whose own businesses have withered. Returning companies have chosen such a path because conventional IPOs in China have slowed to a crawl due to the regulator’s concerns about market volatility, creating a huge waiting line for new listings. Read Full Post…
Bottom line: Focus Media’s first major fund raising and lofty valuation following its backdoor listing in China shows such homecomings can be lucrative, but are also very time consuming, complex and not guaranteed to succeed.
Focus Media in first cash raising since backdoor listing
Focus Media has just announced its first major cash-raising exercise since its privatization from New York and return to China through a backdoor listing, and the results look quite encouraging. The company said it plans to raise 5 billion yuan, or nearly $800 million, by issuing new shares after making the homecoming through a shell company called Hedy Holdings (Shenzhen: 002027).
But what’s really impressive is the valuation that Focus, a provider of advertising services, has gotten as it leads a group of Chinese companies that are abandoning New York listings to return home to China. According to data from 2 reputable websites, Hedy Holdings now has a market value of 150 billion yuan, or about $23 billion. If that’s correct, it would be nearly 6 times what Focus was worth when it launched its plan to privatize in 2012. Read Full Post…
The following press releases and news reports about China companies were carried on April 15. To view a full article or story, click on the link next to the headline.
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McDonald’s (NYSE: MCD) Targeting Buyout Firms As It Seeks to Sell North Asia Stores (English article)
Google (Nasdaq: GOOG) in New China Move with Event for Entrepreneurs (Chinese article)
Okmetic (Helsinki: OKM1V) Board Recommends National Silicon Industry Group Offer (GlobeNewswire)
Focus Media (Shenzhen: 002027) to Raise 5 Bln Yuan in Share Issue After Backdoor Listing
US Says China to Scrap Some Export Subsidies (English article)
Bottom line: iKang’s poison pill plan will kill a hostile offer for the company but could force a management-led group to raise its earlier bid, while CMGE’s China backdoor listing shows a quickening of the process for US-listed Chinese companies to return home.
iKang launches poison pill plan
The first bidding war for a Chinese company looking to privatize from New York has taken an interesting twist, with word that medical clinic operator iKang (Nasdaq: KANG) has launched a shareholder rights program often called a “poison pill”, aimed at preventing hostile takeovers. Usually I’m relatively neutral on this kind of defensive move, as it’s often aimed at getting shareholders better value for their money. But in this case the move seems like a somewhat abusive use of power by iKang’s founder and chief executive to protect his own earlier and significantly lower buyout offer for the company.
Meantime another headline from the recent wave of US-listed Chinese companies to privatize has gaming company China Mobile Games (CMGE) already preparing to re-list in China. If successful, CMGE’s homecoming would be remarkably quick, since it only completed its privatization from New York 3 months ago. Read Full Post…
Bottom line: Focus Media and Giant Interactive will become the first 2 companies to re-list in China after privatizing from New York, but will still struggle for attention and could end up with valuations roughly equal to what they had previously.
Giant completes backdoor listing, Focus close
China’s first 2 companies to attempt re-listings at home after privatizing from New York are both in the headlines today, led by word that Giant Interactive has completed its backdoor listing using a company called New Century Cruises (Shenzhen: 002558). At the same time, separate reports are saying that outdoor advertising specialist Focus Media is on the cusp of completing its own backdoor listing after receiving official approval from the securities regulator to execute its plan using another Shenzhen-listed company called Hedy Holding (Shenzhen: 002027).
The completion of both deals right around the same time seems like more than coincidence, and probably coincides with the regulator’s announcement last week that it will resume new IPOs after a 5 month hiatus due to volatility on China’s stock markets. It’s also quite revealing that both Giant and Focus are big Shanghai-based companies, meaning they probably have more financial sophistication and other resources than most other companies seeking to make a similar homeward migration. Read Full Post…
Bottom line: STO’s backdoor listing and Wumart’s pending de-listing reflect the rise in China of e-commerce, which is boosting delivery companies like STO and undermining traditional retailers like Wumart.
STO delivers back-door IPO
A couple of listing stories are shining a spotlight on China’s rapidly changing retail landscape, which is seeing consumers migrate en masse to e-commerce from traditional shops. The e-commerce boom has fueled a parallel explosion in demand for delivery services, and now one of the largest private couriers, STO, is getting set to make a backdoor listing. On the other side of the shopping aisle are struggling traditional retailers like Wumart (HKEx: 1025), which is reportedly getting ready to abandon its longtime Hong Kong listing through a privatization bid.
This pair of stories also reflects a few other emerging trends for publicly traded Chinese companies, including a growing preference for domestic listings compared with an earlier one for offshore IPOs in places like Hong Kong, New York and Singapore. Shenzhen in particular is fast emerging as a hot spot for high-growth companies to list, thanks to rapid growth in the 5-year-old Nasdaq-style ChiNext board. That trend is likely to continue with plans for a similar board in Shanghai, which could reportedly launch as soon as next year. Read Full Post…
Bottom line: Recent moves by Baidu, SouFun and 7 Days reflect frustration by Chinese companies at lack of understanding by western stock buyers, but also spotlight the need for these companies to better educate investors about their stories.
Better investor education needed from Chinese companies
A trio of headlines last week highlighted the growing financial alternatives for high-growth Chinese companies that have lately felt unappreciated by global stock buyers. The news was quite varied, led by a threat from online search leader Baidu (Nasdaq: BIDU) to privatize its shares from New York, and a large new investment by 2 major private equity firms in online real estate services giant SouFun (NYSE: SFUN). Meantime, the formerly New York-listed 7 Days hotel chain was in headlines as it sold itself to Shanghai’s Jin Jiang International (HKEx: 2006; Shanghai: 600754).
Each of these stories is quite different, but all reflect a growing arsenal of tools that high-growth private Chinese companies have to boost their profiles and valuations as they become more skilled at playing in global financial markets. At a more fundamental level, each of these moves also represents a form of education for investors, which is critical to helping outsiders understand a group of companies from China’s vibrant but still largely unknown private sector. Read Full Post…
Bottom line: New Hong Kong IPOs by CICC and China Re are likely to move ahead and receive solid but not extremely strong demand, though a resumption of new listings in China might not occur until early next year.
New listings set to resume in HK
New signs are emerging of an upcoming resumption for China company IPOs, which have come to a standstill these last few months due to huge stock market volatility. The latest signs of new life are coming from 2 major financial services firms, with investment bank CICC and insurance giant China Re reportedly set to meet securities officials in Hong Kong this week. Both companies filed for Hong Kong listings earlier in the summer, but later went quiet as investor appetite for new shares was quashed by huge volatility on Chinese and Hong Kong stock markets.
This latest activity comes just a week after we saw similar signs of life in both Hong Kong and China. One of those saw outdoor advertising specialist Focus Media take steps for a backdoor listing in Shenzhen, while the other saw snack food giant Liwayway also take initial steps for a Hong Kong listing in the next 6 months. The activity led me to call on China’s securities regulator to quickly lift its current temporary ban on new IPOs as soon as the current market volatility subsides. (previous post) Read Full Post…
