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.
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)
Now the iKang case is getting repeated with Dangdang, which has just received a new rival offer from iMeigu Capital Management. (company announcement; Chinese article) It’s revealing that the announcement is coming from iMeigu and not Dangdang, which should really be announcing this development. That probably reflects the surprise being felt by Dangdang’s outspoken co-founder Li Guoqing, who isn’t happy at the prospect of his own bid for the company getting trumped by an outsider like iMeigu.
According to the latest announcement, iMeigu is offering to buy all of Dangdang’s American Depositary Shares (ADSs) for $8.80 apiece, which is about 13 percent above the earlier management group’s offer of $7.81 per ADS announced last July. iMeigu adds that it is “open minded and flexible” about Dangdang’s future operation and ownership, hinting at the resistance it knows it will receive from Li Guoqing and his wife, Peggy Yu, who now run the company.
iMeiguo’s bid will definitely face an uphill climb, since Dangdang’s latest annual report says Li and Yu collectively own about 35 percent of the company’s shares, representing 83 percent of the voting power of its outstanding common stock. Against that backdrop it’s difficult to imagine iMeigu’s bid succeeding. But the threat of shareholder lawsuits is also quite real if Dangdang accepts Li’s original lower offer, meaning the management team will probably have to raise its bid if it wants to succeed.
Jiayuan Signs Agreement
Next there’s Jiayuan, whose original buyout offer was announced about a year ago at the start of a wave of similar bids for undervalued New York-listed Chinese firms in the first half of 2015. That original bid met with resistance from shareholders who said it grossly undervalued the company, and the buyout group eventually raised its bid significantly in response. Even then, a major independent advisory group recommended against rejecting the deal, though shareholders ultimately approved the buyout in December.
Now Jiayuan is saying that it has signed a formal buyout agreement that will pave the way for its privatization and de-listing. (company announcement; Chinese article) The only other noteworthy thing in the announcement is a target completion date of April 30. If it meets that date, Jiayuan will have needed just over a year to complete its privatization, a relatively long period, mostly due to the pricing controversy.
I’ve previously dismissed shareholder complaints about low offer prices as somewhat unreasonable, saying the market should dictate what happens in this kind of situation. But that said, I’m also happy to see this growing trend for rival bids, which is also a market-driven factor, and reflects the fact that many of the management-led groups really are trying to acquire their companies for extremely low prices.
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