FUND RAISING: Billions in China Deals Churn Through Fund-Raising System
Bottom line: More than $20 billion in new fund-raising deals by China companies outside the country reflects the huge amount of global money now chasing Chinese investments, lured by the nation’s soaring stock markets.
I was so surprised by the number of major new China-related deals churning through the fund-raising system that I decided to do some math, which showed that 5 deals in the headlines today were worth a staggering total of $21 billion. Those deals involved a wide range of topics, led by a new $9 billion privatization bid for software security specialist Qihoo 360 (NYSE: QIHU), the largest such plan to date among a wave of Chinese firms de-listing from New York.
That deal was followed in size by another similar one from Focus Media, whose $7.4 billion plan to re-list in Shanghai following its own New York privatization has hit an unexpected hurdle with an investigation of the shell company that is hosting the backdoor listing. The there’s a hefty $3.5 billion fund-raising plan by leading brokerage Citic Securities (HKEx: 6030; Shanghai:006030), which has attracted 2 of Singapore’s leading investors as it prepares to issue new shares in Hong Kong.
Last but not least are 2 deals that would normally get big headlines but are relatively small in this current frothy fund-raising market. The larger of those has media reporting that leading e-commerce firm Alibaba (NYSE: BABA) and partner Foxconn (HKEx: 2038) are preparing to invest $500 million in Indian peer Snapdeal. The smallest of the deals has large-screen movie theater technology maker Imax (NYSE: IMAX) disclosing it plans to raise $300 million through its previously announced plan to list its China unit in Hong Kong.
I’m beginning to feel dizzy after writing about all of these deals in such a short space, since any one of them would probably merit a stand-alone posting on any normal day. But these aren’t normal times for Chinese companies, thanks to a huge volume of domestic and international money flooding into the nation’s domestic stock markets.
All the money is chasing a massive rally that has seen the main Shanghai index more than double over the last year. The huge influx of funds is also having a residual effect for Chinese companies listed and planning to list in Hong Kong, and has left big Chinese names like Alibaba and Citic Securities flush with cash to make their own acquisitions.
All of that said, there’s really no room here to go into any of the deals in too much detail, so I’ll simply give a quick summary of each and link to the bigger story for anyone who wants to learn more. The biggest deal has Qihoo announcing a management-led plan to go private, valuing the company at nearly $9 billion and making it the latest in a long stream of Chinese companies to take such action due to undervaluation. (company announcement; Chinese article)
Next there’s Focus Media, which is making a backdoor listing in Shenzhen through Hongda Building Materials (Shenzhen: 002211) that would value it at about 45.7 billion yuan ($7.4 billion), more than double what it was worth when it de-listed from New York more than a year ago. That plan was nearly complete, but now media are reporting that Hongda and its controlling stakeholder is being investigated by the securities regulator. (Chinese article) It’s unclear if the backdoor listing and probe are related, but the move looks almost certain to at least delay Focus’ re-listing plan.
Next there’s Citic Securities, which has announced it will raise up to HK$27 billion ($3.5 billion) from a group that includes Singaporean sovereign wealth fund giants Temasek and GIC. (English article) Citic Securities announced the plan late last year, and the final figure is actually a bit below its earlier target, perhaps reflecting some investor fatigue starting to build from all this fund-raising now taking place. (previous post)
Next there are the reports that Alibaba and electronics contract manufacturer Foxconn will jointly invest $500 million in Snapdeal, an up-and-coming Indian e-commerce firm. (English article) This deal was also first discussed back in March, and the most significant element now is that this latest funding could value Snapdeal at about $5 billion — about a third of the heady $15 billion that was discussed at the time of the earlier March reports. (previous post)
We’ll close out with Imax, which has disclosed the fund-raising target of $300 million for its China unit in its latest filing with the Hong Kong stock exchange. (English article) Assuming a float of about 20 percent of the company, that would value Imax China at up to $1.5 billion — nearly 4-fold what the company was worth when it sold 20 percent of itself to 2 Chinese investors last year. All this shows that these are indeed frothy times for fund-raising and company valuations.
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