Bottom line: Privatization plans by Autohome and iKang will face long delays due to shareholder resistance and rival bids, while Wanda Commercial’s similar buyout will proceed soon after some technical issues are resolved.
Autohome, iKang take buyout clashes to court
Three of the larger privatization bids by offshore-listed Chinese firms are running into snags, hinting at a growing wave of resistance to such offers considered by many as too low and opportunistic. Two of the most colorful tales involve online car site Autohome (NYSE: ATHM) and private clinic operator iKang (Nasdaq: KANG), whose management-led buyout deals both hit snags due to unexpected third-party developments. In the latest twist to those stories, Autohome is now taking legal action to prevent a separate share sale that could kill its own management-led buyout bid; while iKang is playing legal games with a rival bidder that trumped an original management-led buyout plan. Read Full Post…
Bottom line: A backdoor listing plan by SF Express in Shenzhen, a New York IPO plan by China Music Corp and 3 new China OTC listings by ZTE units reflect creative approaches to new listings by Chinese firms due to bottlenecks for traditional IPOs.
SF Express eyes backdoor listing
A trio of IPO stories in the headlines are quite revealing, as none are happening through traditional channels on China’s 3 main stock exchanges in Shanghai and Shenzhen. Instead, the largest of the 3 plans has parcel delivery giant SF Express eyeing a backdoor listing using a shell company from the minerals business. Meantime, music streaming company China Music Corp has popped up across the Pacific in New York, where it is reportedly planning an IPO that could be the largest of its kind this year. Read Full Post…
Bottom line: CIC’s withdrawal from the bidding for a stake in Yum’s China unit represents a minor setback, but Yum’s long history in the market makes finding major local investor less important.
CIC ends bid for Yum China stake
KFC parent Yum Brands (NYSE: YUM) has lost a major potential ally as it prepares to spin off its China business, with word that China’s sovereign wealth fund has dropped out of the bidding for 20 percent of the unit. Reuters is reporting that China Investment Corp (CIC) abandoned its bid for a number of reasons, including Yum’s refusal to sell a controlling stake to the new investor group. Yum has previously said it wants to sell just 20 percent of the China unit, which includes 7,200 stores. It also plans to sell more of the unit’s shares through an IPO later this year in Hong Kong or New York. Read Full Post…
Bottom line: Dangdang’s latest buyout offer is likely to meet with minority shareholder resistance due to its sharp downward revision, while Momo is also likely to lower its earlier buyout price if and when it announces a final offer.
Dangdang gets lowered buyout offer
After pausing briefly last week, the train of publicly-traded Chinese firms leaving New York has resumed with the receipt of a new offer for faded e-commerce company Dangdang (NYSE: DANG). In this case it’s significant that Dangdang has announced a revised buyout offer from its founders, since that means the deal most likely has the necessary funding and is likely to move ahead. But it’s also significant that this revised offer is sharply lower than 2 earlier offers for the company, one from its founders and one from a rival bidder.
Next there’s social networking app operator Momo (Nasdaq: MOMO), which has remained mum on its own pending buyout bid in its latest quarterly results. That doesn’t mean the bid is necessarily on hold, especially after word emerged last month that e-commerce giant Alibaba (NYSE: BABA) was joining the buyout group. But Momo’s shares now trade well below their earlier buyout price, and I suspect that if and when it finally announces a concrete offer the price will also be revised downward from the earlier bid. Read Full Post…
Bottom line: A strong field of cornerstone investors indicates BOC Aviation’s IPO could post moderate gains in its trading debut, while Didi’s IPO plan shows that New York remains an attractive option for Chinese firms that are leaders in their sectors.
Fosun, Boeing buy into BOC Aviation
A couple of major IPOs are in the headlines today, led by some encouraging signs for an upcoming listing from BOC Aviation, the aircraft leasing arm of Bank of China (HKEx: 3988; Shanghai: 601398) that’s in the process of making a $1.1 billion offering in Hong Kong. Meantime, we’re getting some of the first concrete signals of the IPO plans for Didi Chuxing, the homegrown Chinese equivalent of Uber, which is reportedly eyeing a US listing in 2018.
Let’s jump right in with BOC Aviation, which looks like an attractive IPO to me since it should benefit from China’s booming demand for air travel. Yet despite that potential, the offer has stumbled somewhat since Bank of China first announced its plans to make a separate listing for the unit back in March. BOC Aviation was initially hoping to raise up to $1.5 billion, but pared the amount back to the current $1.1 billion after meeting with lukewarm demand due to recent market volatility. Read Full Post…
Bottom line: Qihoo’s privatization from New York is likely to move ahead after it resolves a temporary impasse with the foreign exchange regulator, while Wanda’s privatization is also likely to proceed on its belief it can make a quick backdoor re-listing in China.
Qihoo shares fall on latest buyout obstacle
New ripples are spilling through the realm of Chinese companies seeking to return to China after getting lukewarm receptions with offshore listings, reflecting the complexity and difficulty of such deals. Two of the largest such deals are in the headlines as we round out the week, led by word that a privatization plan by software security specialist Qihoo 360 (NYSE: QIHU) may be running into trouble due to China’s strict foreign exchange controls. The other major deal has real estate giant Dalian Wanda (HKEx: 3699) reportedly moving ahead with a plan to privatize the company, after indicating earlier this week it might abandon its original plan.
It’s becoming quite a challenge to write about this so-called “homecoming trend” by Chinese firms these past 2 weeks, since new obstacles seem to be popping up almost daily on this road back to China. The process was never an easy one, and involves raising hundreds of millions or sometimes even billions of dollars to take a company private. Then the buyout groups, usually led by company managers, must convince New York or Hong Kong shareholders to sell their stock, often at modest premiums. Read Full Post…
Bottom line: BOC Aviation and 51Talk are likely to post moderate performances in their upcoming IPOs in Hong Kong and New York, as investors welcome their growth stories but also show concerns about China’s broader slowing economy.
BOC Aviation IPO gets lukewarm reception
Privatizations and de-listings have been making headlines among overseas listed Chinese firms these days, but a couple of upcoming new IPOs shows that New York and Hong Kong remain attractive options for at least some companies. In the bigger of the 2 plans in the headlines today, Bank of China’s (HKEx: 3988; Shanghai: 601398) BOC Aviation unit has filed updated plans for its IPO first announced in March, which includes a final pricing. The other deal has English language instruction specialist 51Talk filing to make a New York IPO to raise up to $100 million.
This latest pair of deals in some ways reflect the constant state of uncertainty in China’s own stock markets, which is where many of these Chinese companies would prefer to list due to higher valuations. IPOs in China are always tough because of a huge waiting line that means new applicants can wait 2 or 3 years or even more. The problem is worsened by political conservatism that often sees the regulator slow or freeze all new offerings when markets become volatile like they are now. 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: Zhaopin’s slight raising of its privatization price could reflect minority investor complaints about undervaluation, while Autohome’s buyout price could rise up to 20 percent in a game of strategic maneuvering with Ping An.
Zhaopin raises buyout price
Minority investors have long complained that a wave of privatization bids for US-listed Chinese companies are grossly undervalued, and now the companies may finally be responding to those grievances. That’s my assessment based on the latest reports that say online recruitment site Zhaopin (Nasdaq: ZPIN) has quietly raised the bid price for its privatization plan, as valuation questions also threaten to derail a similar plan by online car site Autohome (NYSE: ATHM).
Minority investor complaints about undervaluation center on the fact that top managers often control a majority of their companies’ shares through direct and indirect relationships. That means they can choose whatever bid price they want and be assured of its acceptance at shareholder votes. But threats of lawsuits and rival bids, and also perhaps worries about being seen as greedy and unethical are forcing some of the management-led buyout groups to rethink their prices and offer more. Read Full Post…
Bottom line: 21Vianet’s new convertible bond indicates it may be abandoning its previous plan to privatize from New York, and could help to boost its shares by bringing in more investors from China.
21Vianet abandoning privatization?
Nearly a year after announcing a plan to privatize from New York, data center operator 21Vianet (Nasdaq: VNET) has just issued an unusual plan that could see it sell a major stake of itself to a group of Chinese buyers through a convertible bond issue. The plan comes as quite a surprise, since one wouldn’t expect this kind of move from a company that was expecting to imminently privatize.
Accordingly, we could interpret this move as hinting that 21Vianet is quietly abandoning its de-listing plan in favor of an approach that could appeal to many other US-listed Chinese companies whose own privatizations have also stalled over the last year. Such an approach would see these companies bring in major new Chinese investors through this kind of convertible bond issue, which could ultimately help those companies to achieve their target of raising their valuations. Read Full Post…
