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I'll take it as a positive that WSP is listed as the largest pending deal. Key word for this deal is pending, which is the exact wording we've seen from UMW. I think any on the sidelines may want to do a bit more than think twice about what I perceive to be a HUGE opportunity with $3.00 offer on the table and share price in the $1.20 range. I have done my DD...but I'll admit that I trust the DD of UMW and HDS investments a bit more than my own with their boots on the ground.
US-listed China groups take private road
By Paul J Davies in Hong Kong
Private equity groups are scouring US markets for listed Chinese companies, trading at low prices, that want to go private.
Just 16 take-private deals worth almost $4bn – including Shanda Interactive, Harbin Electric and China Security & Surveillance – have been completed in the past two years, according to figures from Dealogic, despite a huge decline in the value of many Chinese stocks. Only half of these involved private equity backers, with the rest a mixture of corporate takeovers or original owners using their own funds or bank financing...
Richard Campbell-Breeden, head of M&A in Asia at Goldman Sachs, said there is strong potential for more US-listed Chinese companies to go private.
“The appetite is there but the price isn’t right ... Markets have been hammered down but vendors’ price expectations have not,” he said. He estimated that up to 50 companies may be looking at such deals, and perhaps 15 could get done in the next 12 months. He added that some smaller companies with a primary listing in Hong Kong are also looking at private options.
Michael Gisser, a partner at Skadden Arps in Beijing, said his firm had seen a consistently high pace of new work involving take-private deals this year, with no signs of a tail-off.
“As long as financing is available on attractive terms, we expect to see most of these transactions going to completion,” he said.
Paul Boltz, a partner at Ropes & Gray in Hong Kong, said that while private equity firms were very interested in these deals, they often saw them as the first step in a two-part process, that would require turning around and relisting the companies in Hong Kong or mainland China within a short period of time.
Largest US-listed Chinese companies targeted for private buyout
Target Acquirer Date and value of deal ($m)
WSP HDS Investments Dec 13 2011*, 935
AsiaInfo-Linkage Citic Capital Jan 20 2012*, 714
Shanda Interactive Entertainment Existing management (30.3%) Oct 17 2011, 678
Zhongpin Inc Existing management April 13, 2012*, 642
China Security & Surveillance Technology Private investor (79.1%) Jan 28 2011, 534
China Water & Drinks Heckmann May 20, 2008, 500
Harbin Electric Tech Full Electric, Abax Global Capital (59.9%) Oct 28 2011, 453
China Real Estate Information Corp E-House, China (45.9%) Oct 28 2011, 450
Global Education & Technology Pearson Nov 21 2011, 294
Source: Dealogic *Pending
“No one has yet done the second step – relisted and achieved the hugely improved valuations that these companies think they can get,” he said. “There are also significant potential obstacles to extracting reverse merger companies especially from the US.”
These obstacles include settling shareholder lawsuits, which are almost always launched as soon as a controlling shareholder offers to buy out minority investors at low valuations. Companies that want to delist often must also dismantlie complicated corporate structures and deal with US tax obligations that arise when US companies move offshore.
“Lots of companies are thinking about taking themselves private again, but probably only a small minority are capable ultimately of getting it done,” said another lawyer involved in examining potential deals.
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