Bottom line: TSMC’s plan for a $3 billion Nanjing chip plant marks the latest in a nascent but growing string of China-Taiwan tie-ups in the chip space, which could gain momentum under Beijing’s recent aggressive program to develop the industry.
TSMC to build $3 bln chip plant in Nanjing
After years of disappointment for failing to fulfill its potential, China high-tech chip sector has suddenly come to life over the last year with a flurry of deals that hint Beijing is taking the lead to promote the sector. The latest of those is one of the biggest and most significant yet in terms of technology, with word that Taiwan’s TSMC (Taipei: 2330; NYSE: TSM), the world’s leading contract chip maker, will build a $3 billion state-of-the-art 12-inch wafer plant in the city of Nanjing.
The move is particularly significant because TSMC is the clear global leader in high-tech microchip production, with a client list that includes most of the world’s major companies like Qualcomm (Nasdaq: QCOM) and Apple (Nasdaq: AAPL). The deal also marks the latest in a nascent series of tie-ups between China and Taiwan in the chip-making space, a potent combination that could someday counter current powerhouses in South Korea and Japan. Read Full Post…
Bottom line: Focus Media and Giant Interactive will become the first 2 companies to re-list in China after privatizing from New York, but will still struggle for attention and could end up with valuations roughly equal to what they had previously.
Giant completes backdoor listing, Focus close
China’s first 2 companies to attempt re-listings at home after privatizing from New York are both in the headlines today, led by word that Giant Interactive has completed its backdoor listing using a company called New Century Cruises (Shenzhen: 002558). At the same time, separate reports are saying that outdoor advertising specialist Focus Media is on the cusp of completing its own backdoor listing after receiving official approval from the securities regulator to execute its plan using another Shenzhen-listed company called Hedy Holding (Shenzhen: 002027).
The completion of both deals right around the same time seems like more than coincidence, and probably coincides with the regulator’s announcement last week that it will resume new IPOs after a 5 month hiatus due to volatility on China’s stock markets. It’s also quite revealing that both Giant and Focus are big Shanghai-based companies, meaning they probably have more financial sophistication and other resources than most other companies seeking to make a similar homeward migration. 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: Unigroup’s aim of building a telecoms and memory chip giant through strategic tie-ups and plant construction could provide challenges for global leaders like Qualcomm and Samsung.
Unigroup affiliate eyes new chip factory
Tsinghua Unigroup has leaped from obscurity to become a major headline grabber over the last 2 years, by snapping up a series of global and domestic assets aimed at building a Chinese chip maker that could someday rival the likes of Qualcomm (Nasdaq: QCOM) and Intel (Nasdaq: INTC). That spending binge continues this week with 2 new headlines, led by comments from Unigroup’s top executive saying he would consider a bid for Taiwan’s MediaTek (Taipei: 2454), one of world’s top makers of chips used in smartphones. In the other headline, a China-listed Unigroup affiliate has just said it plans to raise up to 80 billion yuan ($12.7 billion) to build new chip plants.
All of this comes just a week after Unigroup announced another $600 million deal to purchase a quarter of Taiwan’s Powertech (Taipei: 6239), which engages in the relatively low-end business of test and assembly services for microchips. (previous post) These latest headlines are the clearest indication yet that Unigroup and its affiliates have strong backing from Beijing. I say that because most of the funds being raised in a newly announced private placement by Tongfang Guoxin Electronics (Shenzhen: 002049) are coming from state-run sources. Read Full Post…
Bottom line: Canadian Solar is likely to target at least $100 million in an IPO for its power plant-building unit before year end, which could be an attractive investment alternative for buyers of traditional utility stocks.
Canadian Solar IPO spotlights plant construction
Just days after announcing big new financing for its unit focused on solar power plant construction, Canadian Solar (Nasdaq: CSIQ) is taking a big new step by disclosing it is preparing an IPO to separately list that unit. The move marks the latest wrinkle in the evolving story for Chinese solar panel manufacturers, which are quickly becoming their own best customers by selling their products to solar plants that they build themselves.
Canadian Solar and some of its peers have actually engaged in this kind of plant construction for a while, though the pace has picked up in the last couple of years. But the latest trend marks a divergence from the past, since Canadian Solar and others are now becoming long-term owners of the plants they build and putting them into wholly-owned units that look like a solar equivalent of traditional power utilities. In the past, Canadian Solar and the others would simply build solar plants, and then sell them to independent long-term owners upon completion. Read Full Post…
Bottom line: Weak share reaction to Ming Yang’s new buyout offer and a low valuation for Giant Interactive’s China backdoor listing reflect weakening investor sentiment towards poorly performing Chinese Internet companies.
Chilly reaction for Ming Yang buyout plan
After a brief period of relative quiet, movement is picking up again in the tide of Chinese companies privatizing from New York to re-list back in China. This time former new-energy high flyer Ming Yang (NYSE: MY) announced it has received a management-led buyout offer, becoming the latest firm to receive such an offer. Meantime in China, one of the earlier firms to privatize, gaming company Giant Interactive, has taken the latest step for a backdoor listing in Shenzhen using a shell company called New Century Cruises. (Shenzhen: 002258).
But in an interesting twist to the homeward migration story, a chilly reception from investors seems to reflecting shriveling interest in these poorly performing Chinese companies. In the Giant story, the proposed new valuation for the company looks quite low — far less than what Giant was worth when it de-listed from New York in 2013. That’s quite a switch from what Giant’s talkative chief was saying just 4 months ago, when he boasted his company might be able to get valued as much as 5 times the $3 billion it was worth when it was still listed in New York. Read Full Post…
Bottom line: A Chinese buyer could have a strong chance of winning the bidding for US hotel operator Starwood, with CIC most likely to emerge as Beijing’s preferred candidate among a trio of interested local buyers.
Chinese buyers eye Starwood Hotels
Just a day after China’s 2 leading travel sites put aside their bitter rivalry and formed a major new alliance, we’re getting word of yet another major deal in the hot tourism sector. This time media are saying 3 Chinese buyers are eyeing Starwood (NYSE: HOT), one of the world’s top hotel operators. The 3 potential bidders include 2 of China’s leading private equity investors, China Investment Corp (CIC) and HNA Group. The third is one of China’s top hotel operators, Jin Jiang (HKEx: 2006; Shanghai: 600574), which has been on a buying spree recently both at home and abroad.
If one of the 3 succeeds, the deal would mark the largest purchase ever of an offshore asset by a Chinese buyer, based on Starwood’s latest market value of $15 billion. Word of the deal comes just a day after leading domestic online travel agents Ctrip (Nasdaq: CTRP) and Qunar (Nasdaq: QUNR) buried the hatchet in their bloody battle for share in China’s fast-growing travel market. A Starwood deal would also come less than a week after US-British cruise operator Carnival (NYSE: CCL) formed a new joint venture with 2 Chinese partners. (Chinese article) Read Full Post…
Bottom line: Intel’s massive spending plan to convert its Dalian CPU plant to memory chip production looks like part of its growing alliance with Tsinghua Unigroup, which is probably helping to finance the conversion.
Intel overhauls Dalian chip plant
Just days after struggling US chip maker AMD (NYSE: AMD) announced plans to largely sell off its Asia manufacturing operations, larger rival Intel (Nasdaq: INTC) is doing the opposite with plans to invest up to $5.5 billion in one of its main Chinese fabs. But in an interesting twist to the story, Intel is spending the big money to convert the fab, which was originally designed to make integrated circuits for PCs, to memory chip production.
This unusual twist is just the latest move that shows Intel is placing its bets on China, as it plays catch up to other chipmakers like Qualcomm (Nasdaq: QCOM) that have discovered the future of computing lies in the mobile telecoms space. As part of its catch-up attempts, Intel has formed a major and growing alliance with Beijing-based Tsinghua Unigroup that is squarely focused on chips used in telecoms and IT services. Memory chips would fit nicely into that equation, since such chips are also a critical part of most IT products, ranging from smartphones to complex networks. Read Full Post…
Bottom line: Giant Interactive is likely to achieve a backdoor listing in China over the next 12 months, while Qihoo could receive a new, lowered privatization offer by the end of this year.
Giant eyes China backdoor listing
Early signs of stabilizing on China’s stock markets are breathing new life into the nascent migration by Chinese tech firms that are abandoning overseas listings to re-list back at home. The latest signals of new movement are coming from formerly New York-listed Giant Interactive, which is eyeing a backdoor listing in Shenzhen, and from Qihoo 360 (NYSE: QIHU), which is indicating its faltering plan to de-list from New York is still alive.
Both of these deals have a bit of history, and are part of a broader wave that saw 3 dozen US-listed Chinese firms announce plans to privatize in the first half of this year. Most of those plans came when China’s domestic stock markets were rallying sharply. Backers of the bids were betting that companies whose shares had languished in New York could get much higher valuations from investors in their home China market. Read Full Post…
Bottom line: China’s gaming market remains stubbornly fragmented and unprofitable despite its huge potential, with no clear signs of much-needed consolidation coming anytime soon.
Gamers continue to struggle
As much of China bakes under a summer heatwave, a major trade show this week in Shanghai is casting a different spotlight on the overheated state of the nation’s gaming industry. One report is saying that only 2 percent of companies in the emerging mobile gaming space can generate big profits, and the situation may not improve anytime soon due to a stubborn state of fragmentation.
The problem has led many of China’s US-listed gaming companies to launch privatization drives over the last 2 years, including Giant Interactive, a large but decidedly second-tier player that de-listed a year ago. Giant’s talkative chief Shi Yuzhu is blaming US investors for failing to appreciate his company, with the latest reports saying he thinks Chinese stock buyers will value his firm at more than 5 times what it was worth when it de-listed from New York. Read Full Post…
Bottom line: Mecox Lane’s privatization plan should succeed, but the company is likely to continue its decline even if it re-lists in China under its current lackluster management.
Mecox Lane gets buyout offer
The current privatization wave is giving me a chance to revisit some companies that I haven’t written about in quite a while such as former e-commerce superstar Mecox Lane (Nasdaq: MCOX), which has just become the latest name to receive a buyout offer. In a slightly surprising twist, Mecox Lane’s shares tanked after it made the announcement, losing more than 8 percent to close around 20 percent below the buyout offer price.
Mecox’s announcement is one of the smallest so far in terms of deal value, since the company only has a market value of about $40 million. That’s even less than the $63 million education specialist New Oriental (NYSE: EDU) will need to pay an unusual special dividend announced just a day earlier, in a move I interpreted as a signal that the company had no plans to join the exodus of Chinese companies from New York. (previous post) Read Full Post…
