IPOs: Buyouts Roll On With New Bids For Jiayuan, E-House
Bottom line: The ongoing privatization wave of Chinese firms abandoning New York listings is likely at or near a peak, with gaming and solar companies as some of the likeliest candidates to make new announcements.
The exodus from New York by neglected Chinese companies marches on this week, with online real estate company E-House (NYSE: EJ) becoming the latest to receive a management-led buyout offer. At the same time, online dating site Jiayuan (Nasdaq: DATE) has announced that a suitor who made a similar offer for the company in March has sharply raised its bid, following complaints that the original offer grossly undervalued the company.
When the history books are written, the second quarter of 2015 could well go down as the height of a wave of privatization bids for New York-listed Chinese firms, whose shares have languished in the last few years due to lack of interest from US investors. At the same time, many of those companies are casting an envious eye on China’s rallying stock markets, and are almost certainly hoping to re-list at home in the future.
With its new announcement that it has received a buyout offer, E-House joins a list of more than half a dozen companies to receive such bids since April. Others on the list include not only Jiayuan, but also education specialist Xueda (NYSE: XUE), children’s website Taomee (NYSE: TAOM), gaming specialists China Mobile Games (Nasdaq: CGME) and Sungy Mobile (Nasdaq: GOMO), drug maker Wuxi PharmaTech (NYSE: WX) and most recently medical devices maker Mindray Medical (NYSE: MR) and solar panel maker JA Solar (Nasdaq: JASO). (previous post)
E-House is a relative old-timer in New York among the recent rush to de-list, having offered its American Depositary Shares (ADSs) at $13.80 apiece when it made its trading debut in 2007. But the shares were trading at just $5.93 at the end of last week, meaning the company has lost more than half of its value since its IPO, despite strong US stock market rallies over that period.
E-House said a management-led group has offered to buy the company’s shares for $7.38 each, representing a 24 percent premium over their close at the end of last week. (company announcement) Shares of E-House and its separately listed Leju (Nasdaq: LEJU) unit, along with rival SouFun (NYSE: SFUN), have suffered over the last year as China’s real estate market slows sharply after years of breakneck growth. Chinese investors are certainly much more interested in the China real estate story than Americans, and I honestly can’t blame E-House for its decision. Accordingly, I wouldn’t be surprised to see SouFun and even Leju announce their own buy-outs in this current wave.
Next there’s Jiayuan, which first announced its receipt of a buyout offer at the end of March. Some of its investors quickly complained the offer undervalued the company by as much as half, and last week Jiayuan said it had received interest from other unspecified parties about a potential new bid. Now Jiayuan is saying the original bidder, Vast Profit Holdings, has raised its bid 34 percent to $7.20 per ADS from an original $5.37. (company announcement)
Jiayuan’s shares had originally shot up to as much as $9.48 last week after it hinted at a possible bidding war, though since then they’ve fallen back to the $7 range. They ended the latest session at $7.47, indicating investors may still think there’s a higher offer coming before the company finally gets privatized.
Anyone watching the market is almost certainly wondering which companies might be next to get buyout offers. SouFun could certainly be a possibility, as could companies from other depressed sectors like solar panels and online games. At the rate that companies are leaving there might not be too many left by year-end. But I do expect many premium names like Alibaba (NYSE: BABA) and Baidu (Nasdaq: BIDU) will stay in New York, and that this privatization rush could also come to a sudden halt if and when China’s stock market rally runs out of steam.
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