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…
Bottom line: CMC’s purchase of a stake in the parent of the Manchester City soccer club looks at least partly political, and could be followed by similar purchases by Alibaba or LeTV next year as companies try to earn goodwill from Beijing.
CMC buys into global soccer
Anyone who thought the entrepreneurial China Media Capital (CMC) might represent a new breed of market-oriented Chinese investors will be disappointed to learn the company’s latest purchase looks quite political and aimed at pleasing Beijing. That investment has the Shanghai-based CMC teaming up with the financial giant Citic Group, another highly political animal, to buy 13 percent of a company whose prize asset is the Manchester City soccer club.
I’m probably being slightly unfair in calling this move purely political, since China is certainly a soccer-crazy country that could benefit from the expertise that CMC will get through its investment in City Football Group (CFG). But the timing of this deal looks quite suspicious, as it comes just weeks after Chinese President Xi Jinping visited the team during a tour of Britain, where he released a plan to turn China into a soccer powerhouse. Read Full Post…
Bottom line: Shanghai’s clampdown on piracy of the Disney brand reflects the city’s desire to protect its huge investment in the soon-to-open Shanghai Disneyland, and also Disney’s growing clout in China.
Shanghai protects Disneyland investment
Disney (NYSE: DIS) pirates, beware. As the grand opening of mainland China’s first Disneyland draws near, the park’s home city of Shanghai is stepping up efforts to protect is multibillion-dollar investment by clamping down on piracy of the Disney brand. That crackdown is certainly long overdue, and has just netted 5 hotels that were illegally using the Disney name to dupe visitors into thinking they were affiliated with the US entertainment giant.
In an interesting aside to this clampdown story, the 5 properties busted in the new clampdown were owned by Shenzhen-based Vienna Hotels Group. That’s significant because in August Vienna was reportedly in talks to be acquired by Shanghai’s leading hotel group Jin Jiang (HKEx: 2006; Shanghai: 600754). (previous post) Thus this latest crackdown could signal the Jin Jiang-Vienna talks ultimately collapsed, since it’s unlikely Vienna would have been targeted in such a high-profile way if it was part of the locally well-connected Jin Jiang. Read Full Post…
Bottom line: Tuniu’s new tie-up with HNA looks like a smart move that could position it as a leading provider of resort vacation packages, and could also signal the rise of a meaningful rival to industry leader Ctrip.
Tuniu travels to Hainan with HNA
Leading online travel site Ctrip(Nasdaq: CTRP) has emerged as the loser in a recent bidding war for a stake in smaller rival Tuniu (Nasdaq: TOUR), which has just announced a new alliance that will see it receive a $500 million investment from one of China’s top traditional travel companies. This latest in a recent flurry of deals from the travel space will see HNA Tourism get about a quarter of Tuniu’s shares for its investment, making it Tuniu’s largest shareholder.
HNA Tourism is a unit of HNA Group, one of China’s more dynamic state-run investors that is also parent of Hainan Airlines (Shanghai: 600221), one of the country’s best-run airlines. Based in the tourism-friendly island of Hainan, HNA certainly looks like a logical and well-connected partner for Tuniu, even though media were reporting last week that the more entrepreneurial Ctrip was in talks for a similar deal. (previous post) Read Full Post…
Bottom line: A new alliance between some of China’s largest hotel operators is the latest reaction to Ctrip’s growing clout in the travel services sector, and could lead the anti-trust regulator to take remedial action next year.
Hotel operators band together against Ctrip
An increasingly powerful Ctrip(Nasdaq: CTRP) is in the headlines as the new week begins, with word that some of China’s top hotel operators are banding together to protest what they see as unreasonable demands by the online travel services giant. News of this action is once again spotlighting Ctrip’s recent purchase of big stakes in nearly all of its major rivals, in a bid to reduce the rampant competition that has plagued the industry over the last 2 years.
I wrote about this issue just last week, when media reported that Ctrip was in talks to take a stake in travel package site operator Tuniu (Nasdaq: TOUR), one of the few major players that doesn’t have an equity alliance with Ctrip. (previous post) I observed that such a tie-up would help Ctrip by neutering one of its last major domestic rivals. That could ultimately draw the attention of China’s anti-trust regulator, which until now hasn’t taken any action to break-up near monopolies in many of the country’s Internet spaces. Read Full Post…
Bottom line: Two new China OTC listings for companies that may have previously chosen New York, and slow progress for Giant Interactive’s backdoor listing, reflect fading offshore interest in these companies, as more options emerge for them in China.
Money-losing soccer team plays on China’s OTC
A trio of IPO stories are in the headlines as we head into the new week, led by new listings for online classified ad site Baixing and a soccer club co-owned by Alibaba(NYSE: BABA). But unlike earlier days when these 2 IPO stories might have both surfaced in New York, both are happening on China’s recently launched modest over-the-counter (OTC) board, reflecting shifting capital raising patterns.
The third of these new IPO stories involves Giant Interactive, which was formerly listed in New York but privatized 2 years ago and is trying to return to China through a backdoor listing in Shenzhen. That story has the Shenzhen stock exchange requesting more information from Giant as it seeks to list via a company called New Century Cruises (Shenzhen: 002258). While such a request isn’t too worrisome, it does signal that the return to Chinese stock markets could be a bumpy ride for the many US-listed companies now leaving New York. Read Full Post…
Bottom line: The arrest of a leading private equity executive for insider trading and Jin Jiang’s new fund-raising represent the latest efforts to clean up China’s unruly stock markets and make them more attractive to international investors.
Private equity giant detained for insider trading
I don’t normally write too much about China’s domestic stock markets due to their chaotic nature, but a couple of news items are shining a spotlight on the ongoing major task of cleaning up these unruly venues as they try to become more international. The larger of the 2 stories is making big waves here in China, where the one of the nation’s best-known private equity chiefs has been detained for insider trading. The second item has recently acquisitive hotel operator Jin Jiang (HKEx: 2006; Shanghai: 600574) preparing for a major new fund raising, as it tries to clean up its own financial house in a bid to become China’s first global hotel operator.
Each of these items is quite different, though both are focused on different aspects of cleaning up a domestic stock market that often seems more like the Wild West than a place for serious investors. Share price manipulation is common practice in the market, which is reflected in the insider trading story. The Jin Jiang story reflects the murky relationships that often exist between listed companies and government entities, making it nearly impossible for serious investors to clearly understand a company’s financial health. Read Full Post…
Bottom line: The equity tie-up between Ctrip and Qunar is likely to be an uneasy one driven by necessity rather than desire to work together, and stands a 50-50 chance of ending in divorce.
Ctrip, Qunar get hitched … sort of
The year 2015 will go down in Chinese Internet history as the year of the uneasy partnership, as several pairs of former foes suddenly merged even as their outspoken heads refused to work together. The latest of those unions is seeing former bitter rivals Ctrip (Nasdaq: CTRP) and Qunar(Nasdaq: CTRP) get together in a quasi marriage that qualifies as the largest and also strangest union to date.
This particular union isn’t even really a true marriage, and instead is a very big equity swap that will see Qunar’s controlling stakeholder Baidu(Nasdaq: BIDU) get 25 percent of Ctrip. Ctrip will get a larger chunk of Qunar on a percentage basis, ending up with 45 percent voting interest in its former rival. (Baidu announcement; English article; Chinese article) Like the other odd marriages this year, this latest one looks set for troubles, and could stand a very real chance of divorce. Read Full Post…
Bottom line: Recent moves by Baidu, SouFun and 7 Days reflect frustration by Chinese companies at lack of understanding by western stock buyers, but also spotlight the need for these companies to better educate investors about their stories.
Better investor education needed from Chinese companies
A trio of headlines last week highlighted the growing financial alternatives for high-growth Chinese companies that have lately felt unappreciated by global stock buyers. The news was quite varied, led by a threat from online search leader Baidu (Nasdaq: BIDU) to privatize its shares from New York, and a large new investment by 2 major private equity firms in online real estate services giant SouFun (NYSE: SFUN). Meantime, the formerly New York-listed 7 Days hotel chain was in headlines as it sold itself to Shanghai’s Jin Jiang International (HKEx: 2006; Shanghai: 600754).
Each of these stories is quite different, but all reflect a growing arsenal of tools that high-growth private Chinese companies have to boost their profiles and valuations as they become more skilled at playing in global financial markets. At a more fundamental level, each of these moves also represents a form of education for investors, which is critical to helping outsiders understand a group of companies from China’s vibrant but still largely unknown private sector. Read Full Post…
Bottom line: Alipay’s move into Hong Kong through a tie-up with Marriott marks the start of a major global expansion for the online payment service, with Hong Kong the likely first stop due to its strong China ties.
Alipay in new Marriott tie-up
Homegrown Chinese electronic payments service Alipay is taking its growing rivalry with state-owned behemoth UnionPay to the global stage, with word of a major new move outside its home China market. That move will see Alipay follow a familiar route for many globally-minded Chinese companies, with a first stop in Hong Kong. It has Alipay forming a major new alliance in the former British colony with global hotel giant Marriott (NYSE: MAR), as the first stop on an overseas tour that could ultimately see the financial services affiliate of Alibaba (NYSE: BABA) challenge global names like Visa (NYSE: V) and MasterCard (NYSE: MA).
This latest move is part of a larger new tie-up between Marriott and Alipay, which is part of the Alibaba-affiliated but separately owned Ant Financial. The tie-up is mostly limited to mainland China initially, but significantly includes Hong Kong-based hotels. It also marks one of the biggest moves to date into Hong Kong by Alipay, which is better known as an electronic payments service used for smaller items usually costing $20 or less using shoppers’ online accounts and smartphones. Read Full Post…
Bottom line: Airbnb should have a strong chance for success in China, thanks to its good choice of local partners, strong experience in its field and relatively little competition from homegrown rivals.
Airbnb hangs out China shingle
Not too many foreign Internet companies are coming into China these days, mostly due to the poor track record for previous big names. But that lackluster record of isn’t deterring online travel site Airbnb, which has been quite high-profile with a formal announcement of its entry to China.
The road into China is littered with cases of failure, with big names like Google (Nasdaq: GOOG), eBay (Nasdaq: EBAY), Yahoo (Nasdaq: YHOO) and Groupon (Nasdaq: GRPN) all entering the market at various times, only to withdraw later. In most cases companies failed to anticipate stiff competition, which was ready to use many tactics the big international names considered unacceptable. Failure to adapt to local tastes was also a factor, as many of these big names tried to use identical business models for China that they did in the west. Read Full Post…
