AsiaInfo Bidding War Erupts, More to Come 亚信联创收购战打响

By newsdoug on February 22, 2012

The confidence crisis for US-listed China stocks has taken an interesting twist with the start of a bidding war for AsiaInfo-Linkage (Nasdaq: ASIA), one of the oldest US-listed China firms. The development underscores the fact that despite questionable accounting practices at many smaller US-listed Chinese firms, there are still many good companies in the market that may look like good values for buyers wanting to take advantage of depressed share prices that have resulted in cheap valuations. On the IPO front, meanwhile, a steady stream of noise from e-commerce giant 360Buy, which also goes by the name Jingdong Mall, indicates the company may be getting close to making its first public filing for a public offering that it first announced plans for last fall. Let’s look at AsiaInfo first, as the new bidding war could be the first in a new string of buyout offers for healthy US-listed Chinese firms whose shares have tumbled by 50 percent or more in the last year after a series of accounting scandals. Media are reporting that big-name US private equity firms including KKR and TPG are eying bids for AsiaInfo-Linkage that could value the company at $1 billion or more. (English article) That would be a big premium over its market value that stood at about $700 million when Chinese investor CITIC Capital made an offer to buy out AsiaInfo last month for an undisclosed sum. (previous post) AsiaInfo’s shares rose 11 percent to $12.95 after news of a potential bidding war came out yesterday, and its shares have risen considerably from December when they traded below $7. Of course it’s also worth noting the company’s shares traded above $30 less than 2 years ago, when Chinese tech and Internet stocks were still popular. Investors will be watching closely to see how this new bidding war evolves, and I would expect to see more offers emerging for other healthy companies that private equity firms see as undervalued at current market prices. Meantime, 360Buy has just said it will invest 3.5 billion yuan, or more than $500 million, to beef up its logistics systems, in the latest of a series of recent announcements to raise its profile in the run-up to a potential multibillion-dollar US IPO. (English article) The company earlier this week announced the official launch of its e-book service, and has recently brought in a series of experienced managers from other companies to make itself more attractive to overseas investors. I wouldn’t be surprised to see the 360Buy make its first public IPO filing by the end of March if stock markets remain strong, though it will probably attract limited investor interest due to stiff competition from not only domestic rivals like Dangdang (NYSE: DANG), but also aggressive foreign players in China like Amazon (Nasdaq: AMZN) and Wal-Mart (NYSE: WMT), which is trying to acquire a controlling stake in local player Yihaodian.

Bottom line: A bidding war for AsiaInfo-Linkage could presage more such wars for US-listed Chinese firms whose shares have been hit by negative investor sentiment.

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