Giant, RDA De-List As Deal-Making Slows
Two more US-traded Chinese firms are on the cusp of de-listing, with online game operator Giant Interactive (NYSE: GA) and chipmaker RDA Microelectronics (NYSE: RDA) just announcing they have wrapped up buy-out deals that will pave the way for their imminent privatization. These 2 de-listing stories were announced months ago and are completely expected. But the bigger underlying story is the lack of major new privatization announcements in the last half year. In a similar development, major new IPOs by Chinese firms in New York have slowed considerably since a boom of offerings in April and May, indicating the broader deal-making market may be entering a new, more stable phase.
The imminent de-listings of Giant and RDA will mark the end of processes that kicked off more than half a year ago for each company. In both cases, private equity buyers made offers for the firms, believing that their shares were undervalued by Wall Street. Giant and RDA were just the latest firms to receive such offers, in a trend that began 2 years earlier and saw big names like Focus Media and Shanda Interactive all go private for similar reasons.
Giant received its buy-out bid last November, with a management-led group offering to buy the company for about 20 percent more than its valuation at the time. (previous post) Shareholders later approved the deal, and Giant has just announced that the buy-out has been completed. (company announcement) The company said it requested its shares be suspended at the end of last week, and that it expects to de-list in the near future.
RDA is a similar case, announcing its receipt of a buy-out offer from a group led by an investment arm of Tsinghua University back in November. (previous post) RDA’s shareholders also approved that deal, and now the company has completed the merger that will pave the way for its final privatization. (company announcement) Like Giant, RDA said it has also requested a halt in trading of its shares, which should be followed in the near future by their de-listing.
As I’ve said above, what’s perhaps most interesting about these latest 2 deals is that they could represent the end of a wave of similar privatizations for US-listed Chinese firms over the past 2 years. According to my calculations, the last major new similar de-listing announcement came back in February, when clinic operator Chindex (Nasdaq: CHDX) unveiled its own plan to be acquired by a private equity group. (previous post)
That means we’ve now gone a full 6 months without a major new privatization bid, which seems like a safe period for calling an end to the trend. Of course it’s still possible we could see 1 or 2 more such bids as private equity looks for a few more bargains. We could also see some strategic acquisition bids for remaining undervalued companies, with cash-rich companies like Alibaba and Baidu (Nasdaq: BIDU) potentially continuing their recent acquisition sprees.
Meantime, activity for new New York IPOs has also slowed sharply over the last 2 months, following a boom in April and May that saw names like microblogging leader Weibo (Nasdaq: WB) and e-commerce giant JD.com (Nasdaq: JD) make big new offerings. In this case the slowdown could be at least partly seasonal, since many US bankers and investors go on holidays during the summer months.Listing candidates could also be waiting until e-commerce giant Alibaba makes its blockbuster offering, expected to raise up to $20 billion in September or October.
Still, the bigger picture is that a frenzy of deal-making involving privately-owned Chinese firms may finally be winding down as the market settles into a new equilibrium. Now the next step should see all the asset buyers trying to reposition their purchases, which could lead to a new round of sales and listings around 2 years down the road.
Bottom line: A wave of deal-making involving private Chinese firms is nearing an end following a 2-year frenzy of activity, which should be followed by a 2 year quiet period before the next wave of sales begins.
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