The US$9.3 billion buyout of Qihoo 360 Technology Co (奇虎360), owner of China’s second-biggest search engine, is the latest sign that Chinese companies are renewing their interest in delisting from US exchanges to sell equity locally at a higher valuation.
The US$77 per American depositary receipt offer for Qihoo from an investor group including Ping An Insurance (Group) Co (平安保險集團) and Sequoia Capital China follows a non-binding agreement initially proposed six months ago.
The deal is part of a string of US-listed Chinese companies that have announced privatization offers worth a record US$37 billion this year as investors and executives seek to shift listings to China.
While the flow of takeover bids has slowed since June as Chinese stocks fell in a rout that erased as much as US$5 trillion of equity value, making a local listing less attractive, they are now coming back after markets stabilized.
The buyouts have primarily targeted the US traded stock because they are cheap compared with their Chinese-traded peers.
“People were worried that the Qihoo deal might fall apart because of its gigantic size,” Chiheng Tan, an analyst at Granite Point Capital Inc, said by telephone from Boston. “But since a deal as big as Qihoo didn’t have a problem getting financed, more Chinese companies may follow suit.”
The Qihoo deal is offering investors a premium of 16.6 percent to the company’s closing price on June 16 with the deal expected to close in the first half of next year, according to a statement on Friday last week.
Shares of Qihoo rose 1.7 percent to US$73 in New York after the announcement.
The offer, made by an investor group that also includes chief executive officer Hongyi Zhou (周鴻禕) as well as Citic Guoan Golden Brick Capital (金磚絲路資本) and Huasheng Capital, is at the same price as the June proposal.
While 38 US-listed Chinese companies have received offers this year to go private, only five have completed the process.
Investors are looking for ways to accelerate the delistings to take advantage of the improving market environment after the Shanghai Composite Index jumped 22 percent from a bottom in August.
Homeinns Hotel Group and dating site Jiayuan.com International Ltd this month both accepted acquisition offers from China-listed firms, a move that will quicken the pace by which they could move to local trading.
Homeinns has agreed to be bought by Shanghai-listed hotel operator BTG Hotels Group (首旅酒店集團) based on an offer that is almost 10 percent higher than the original buyout price in June.
Baihe Network Co (百合網聯合), listed in China’s over-the-counter market, is to acquire the country’s biggest online matchmaking site Jiayuan.com through its subsidiaries, also at a premium to the initial deal.
With both offers being made by Chinese companies that are already traded locally, it means that once the buyouts are completed, Homeinns and Jiayuan will immediately become part of publicly listed entities in China.
Such an approach gives companies a faster route to the Chinese stocks market than going through the initial public offering process, according to Henry Guo, an analyst at Summit Research Partners LLC.
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