BUYOUTS: eLong, Ming Yang Near NY Exit Door

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Bottom line: eLong and Ming Yang will complete their privatizations and de-list by the middle of the year, but more than half of the buyout offers for Chinese companies still waiting to exit New York will ultimately collapse.

eLong signs final buyout offer

Two longtime New York-listed Chinese companies are charging for the exit door on this last trading day in the Year of the Ram, with online travel site eLong (Nasdaq: LONG) and wind power equipment maker Ming Yang (NYSE: MY) both saying they’ve just signed final buyout agreements that will result in their privatization. Neither of these deals was ever in much doubt, since eLong’s was backed by Internet titan Tencent (HKEx: 700) and Ming Yang’s was relatively small, valued at less than $400 million, and was crafted by the company’s chief and dominant shareholder.

This pair are likely to ultimately complete their privatizations over the next 2-3 months and de-list by mid-year, following previous successful de-listings of names like online game operators Perfect World and China Mobile Games. But the big majority of previously announced buyout plans by around 40 US-listed Chinese companies are still pending, and I still believe that half or more of those could ultimately collapse due to failure to secure necessary funding.

Such funding was never in doubt for eLong, which already counted leading travel site Ctrip (Nasdaq: CTRP) and Tencent among its major shareholders before it received its original buyout offer last August. That offer surprised many people, as it came from Tencent, which made the bid without Ctrip’s knowledge or consent. At the time Tencent owned 15 percent of eLong and Ctrip held 37 percent. (previous post)

Ctrip was quick to say it didn’t want any hostility, and added it was open to working with Tencent on the buyout. Now it looks like the 2 companies did manage to work out an agreement, based on the latest announcement from eLong saying it has signed a definitive buyout agreement that will bring it one big step closer to abandoning its decade-long listing in New York. (company announcement)

The new announcement includes Tencent’s name as a member of the buyout group, though it doesn’t specifically mention Ctrip. But it does say a new member called C-Travel has joined the consortium, and adds that the buyout group consists mostly of its existing shareholders. That leads me to believe that C-Travel is just another name for Ctrip being used in this transaction.

Price Unchanged

The final eLong buyout price was $18 per American Depositary Share (ADS), which is unchanged from the original offer last summer. I was previously expecting that some buyout groups might raise their original offer prices after a few minority shareholders objected that many of the offers were too low. But that’s clearly not the case with eLong, probably because most of its shares were already owned by Tencent and Ctrip anyhow.

Ming Yang has also announced its signing of a final privatization deal, and again the price of $2.51 per ADS is unchanged from its original buyout deal announced last year. In this case there probably wasn’t too much objection to the original price because the buyout was led by company chief Zhang Chuanwei, who also happens to own or control about half of Ming Yang’s shares.

These 2 deal finalizations are likely to be the last during the Year of the Ram, since there’s only one more trading day left before the week-long Lunar New Year holiday that begins on Sunday. The soon-to-end Lunar Year will certainly go down as one that saw many US-listed Chinese companies charge for the exit door from New York in pursuit of higher valuations in China. But the incoming Year of the Monkey could hold a few new surprises, including the withdrawal or collapse of many of the bids that are still pending, especially if China’s economic slowdown accelerates.

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