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. Read Full Post…
Bottom line: Qihoo’s privatization is likely to succeed after shareholder approval of its buyout offer, though many similar pending deals could collapse and might consider strategic stake sales like the new one by LightInTheBox.
Shareholders approve Qihoo buyout
The volume of noise coming from Chinese companies privatizing from New York has dropped sharply in the last month, reflecting volatility in their home market where many hope to one day re-list. But 2 major new stories from that wave are back in the headlines, led by shareholder approval for what would be the biggest privatization so far for security software specialist Qihoo 360 (NYSE: QIHU).
At the same time, the much smaller e-commerce firm LightInTheBox (NYSE: LITB) has just closed another deal that looks less radical than an outright privatization and could provide an alternative template for companies seeking to attract more investor attention. That deal has the company selling 30 percent of itself to Hong Kong-listed Zall Development (HKEx: 2098), which paid a large premium for the stake. Read Full Post…
Bottom line: Beijing should launch an aggressive campaign to privatize state-owned enterprises, which could cause some short-term pain but will ultimately put the economy on a more stable long-term footing.
Profits tumble at SOEs
The latest profit reports for big state-owned enterprises (SOEs) are coming in for the first 2 months of the year, and the picture isn’t pretty and even looks quite worrisome for China’s thousands of state-owned enterprises (SOEs). New data published late last week showed profits for SOEs tumbled 14.2 percent in January and February combined, as they continued to be plagued by problems like overcapacity and weak demand due to China’s slowing economy.
But one of the biggest problems facing these companies, and one that threatens their long-term survival, is their failure to act commercially, a legacy of China’s planned economy that saw big SOEs historically function as tools for executing government policy. Such a tendency is what, for example, drives steel makers to continue producing at full throttle even when every ton of product they sell adds to losses due to the sector’s huge overcapacity. Read Full Post…
Bottom line: A new rival bid for Dangdang and the long closing period for Jiayuan’s privatization reflect growing shareholder resistance to low prices being offered for Chinese companies trying to de-list from New York.
Dangdang gets rival buyout bid
A couple of new headlines reflect the growing chorus of complaints about low bid prices being made for Chinese companies privatizing from New York, led by a surprise new rival offer for former e-commerce leader Dangdang (NYSE: DANG). In the other headline, online dating site Jiayuan (Nasdaq: DATE) is finally moving closer to the New York exit door, after a year-long process that saw the company’s original buyout offer meet with stiff resistance from shareholders unhappy about the price.
The volume of protest noise against some of the most recent offers has certainly been growing, as company shareholders try to get more money for their stock in the wave of buyout offers. The most recent twist saw shareholders cry foul over a management-led buyout bid for online cosmetics seller Jumei (NYSE: JMEI) last month. (previous post) A slightly different but related development saw the founder of medical clinic operator iKang (Nasdaq: KANG) cry foul after his own bid for his company got trumped by a higher offer from an independent bidder. (previous post) Read Full Post…
Bottom line: Canadian Solar’s Recurrent Energy unit is likely to make its first public filing for a New York IPO in the next 2 weeks and should get a positive reception, while Jumei is likely to quietly de-list from the US in the next 3-4 months.
Recurrent Energy gets big new financing
One of the few Chinese IPOs likely to happen in New York this year is moving closer to the launch gate, with word of major new financing for the power plant-building unit of solar panel maker Canadian Solar (Nasdaq: CSIQ). But while that IPO for Recurrent Energy moves closer to the IPO gate, announcement of a new privatization bid for online cosmetics seller Jumei International (NYSE: JMEI) is far more typical for the market these days.
This pair of stories reflect a growing new reality for US-listed Chinese companies. That reality is seeing some of China’s leading private companies choose New York for their listings, banking on interest from global investors seeking to buy into the China growth story. At the same time, many smaller lesser-known Chinese companies listed in New York have discovered US investors are far less interested in their stories, and are privatizing with plans to re-list and hopefully get higher valuations back in China. Read Full Post…
Bottom line: Sinovac may be forced to raise its buyout offer following a chorus of complaints from investors, while Ku6’s new buyout offer is unlikely to meet with any resistance due to its small size and big premium.
Sinovac gets buyout offer
The final days of the Year of the Ram are seeing 2 more US-listed Chinese companies head for the exit door, with new privatization announcements from vaccine maker Sinovac (Nasdaq: SVA) and Internet video company Ku6 (Nasdaq: KUTV). Sinovac’s announcement instantly drew criticism from one US fund manager for being too low, and it’s quite possible we could see some law firms that specialize in securities litigation voice similar criticism.
Meantime, no one is criticizing the Ku6 offer, mostly because this is a company that ceased to be relevant long ago. I’ve followed Ku6 since it first went public as Hurray Holdings in 2005. Back then it raised $70 million in its IPO, and it was acquired 4 years later by online gaming giant Shanda. But all that seems like a distant memory now, and the new privatization bid values the company at just $51.5 million. Read Full Post…
Bottom line: A flurry of lawsuits alleging undervaluation in the latest buyout offer for US-listed Chinese firm Synutra could signal growing new resistance to low valuations for many other existing offers.
Lawfirms pan Synutra buyout offer
The law firms that make their money by suing publicly traded companies have found a new reason to sue, taking aim at the dozens of Chinese firms now trying to privatize from New York. This new wrinkle in the wave of privatization bids for US-listed Chinese companies comes after infant formula maker Synutra (Nasdaq: SYUT) became the latest to get an offer from a management-led group to take the company private.
This marks the first time I’ve seen so many lawsuits threatened after a company announced the receipt of a buyout offer, with at least 3 firms saying the offer undervalues the company. Up until now, we’ve only seen minor shareholder resistance to most buyout offers, even though many of the buyers are taking advantage of depressed valuations for the companies being privatized. Read Full Post…
Bottom line: iDreamSky’s finalized buyout offer marks the start of a new wave that will see more than a half dozen US-listed Chinese firms sign similar offers by the Lunar New Year, mostly at the same prices from original privatization deals announced last year.
iDreamSky finalizes buyout bid
The New Year is kicking off with a shot of deja vu, as a wave of companies that announced privatization bids in the first half of 2015 are now returning to investors with concrete offers. In the latest chapter of this two-part wave, mobile game operator iDreamSky (Nasdaq: DSKY) has just announced its signing of a formal deal to take the company private.
iDreamSky announced its original intent to privatize last June, at the height of a wave that saw about 3 dozen such de-listing bids proposed last year, mostly in the first half. The wave of announcements skidded to a halt in mid June when China’s stock markets underwent a massive correction after an even larger rally. But with China’s markets showing signs of stability, the de-listing movement has resumed. Read Full Post…
Bottom line: Qihoo is likely to complete its $9 billion privatization in the next few months at its original bid price, while Jiayuan’s buyer may have to raise its price again to placate unhappy shareholders.
Qihoo buyout advances, Jiayuan hits resistance
The year of the buyout for US-listed Chinese firms is ending on a loud note, with announcement of a formal privatization offer for security software specialist Qihoo 360 (NYSE: QIHU), the largest of the deals among the 3 dozen announced in 2015. But while Qihoo’s plan moves ahead, another older deal to buy out online dating site Jiayuan (Nasdaq: DATE) is running into trouble due to complaints about its low valuation. In the latest development on that front, a major third-party advisory service has recommended that shareholders reject the offer because it’s too low.
Last but not least, I’ll end this buy-out round-up with some whimsical speculation that Phoenix New Media (NYSE: FENG) may be next to receive a privatization offer. My speculation isn’t based on any insider information, but rather the simple fact that the company’s stock jumped 14 percent on Friday for no apparent reason. The company also looks similar to many of the others that have already received similar offers. Read Full Post…
Bottom line: The large premium being offered in Trina Solar’s new buyout reflects a recent flood of private equity chasing privatization deals for US-listed Chinese firms, and could breathe new life into many previously announced bids that have become dormant.
Trina gets rich buyout offer
The homeward migration by US-listed Chinese firms has taken a turn into the new energy sector, with solar panel maker Trina (NYSE: TSL) becoming the first major player in the space to announce a management-led buyout offer. Throughout the current round of buyouts that has seen some 3 dozen US-listed Chinese companies announce privatization bids this year, few have come in the new energy sector that includes about a half dozen of China’s top solar panel makers listed in New York.
That’s not to say that New York has been a comfortable place for these companies. Most of the big names saw their shares soar in their first few years in New York, only to watch them tumble between 2011 and 2013 as panel prices plunged due to massive oversupply. That downturn saw the departure of 2 of the sector’s biggest names from Wall Street, though the exit of Suntech and LDK was prompted by bankruptcy rather than privatization. Read Full Post…
Bottom line: Domestic private equity is fueling a sudden resurgence in privatizations of US-listed Chinese firms, with a flurry of new deals likely to come after the signings of new buyout offers for Homeinns and Jiayuan.
Homeinns, Jiayuan move closer to US de-listings
Two companies looking to de-list their shares from New York and re-list back in China have taken major steps forward, with hotel operator Homeinns (Nasdaq: HMIN) and online dating site Jiayuan (Nasdaq: DATE) both announcing they have signed formal buyout offers to privatize. In an interesting twist to the privatization story that has seen dozens of US-listed Chinese firms announce similar plans, Homeinns and Jiayuan are both being purchased by China-listed firms as part of their buyout deals.
That means that once the buyouts are consummated, both Homeinns and Jiayuan will immediately become publicly listed in China. Such a development would mark a rapid shortening of the time these companies would need to return to Chinese stock markets from the US. In the past, the small number of similar migrations was typically taking 2 years or more to complete. Read Full Post…
