Market Overview

YY Might Go Private...What Other Chinese Companies Are Up For Grabs?

YY Might Go Private...What Other Chinese Companies Are Up For Grabs?

Shares of YY Inc (ADR) (NASDAQ: YY) spiked higher by more than 5 percent Thursday morning after the company announced the receipt of a non-binding proposal letter from Jun Lei, the company’s Chairman of the Board, and David Xueling Li, the company’s Chief Executive officer proposing a “going-private” transaction to acquire all the company’s shares at a cost of $68.50 per share.

YY, a Chinese based company that offers a real-time interactive social platform, is the latest company to see a double-digit spread between its share price and proposed buyout offer. Naturally, a wide spread indicates investors are skeptical that such a deal would go through at the proposed price.

In YY’s case, shares were trading at $61.13 shortly after the start of Thursday’s trading session but drifted lower and traded as low as $59.15 in the following few hours of trading.

MCM Partners analyst Hank Terrerbrood released a report on the topic. The analyst noted that many “going-private” deals involving U.S.-listed Chinese have substantially larger spreads between the trading price and proposed buyout price.

One of the largest spreads can be seen in China Information Technology, Inc. – Ordinary Shares (NASDAQ: CNIT). A takeout offer has been proposed for $4.43 per share, but shares were trading at $2.87 Thursday morning.

The analyst did however point out that offers involving major shareholders who own or control a majority of the company is unlikely to see a “protracted” battle and stand a better chance of seeing their offer accepted.

What Other Companies Up For Grabs?

One of the larger names within the “go private” list includes Qihoo 360 Technology Co Ltd (NYSE: QIHU). With a market cap of approximately $8 billion, the company sells Internet and mobile security products within China. In late June the company received a “go private” offer from its billionaire CEO Zhou Hongyi for $77 per share.

Shares of Qihoo were trading higher by nearly 10 percent Thursday morning at $60.76. However, immediately following the “go private“ offer shares surged by more than 12 percent and traded above $74 per share.

An example of a noticeable spread can be seen in the case of Momo Inc (ADR) (NASDAQ: MOMO), a China based company that operates Momo, a mobile-based social networking platform.

Shares of Momo were surging by more than 15 percent Thursday morning and traded above the $16 per share mark. However, shares traded above $17 per share after the company’s CEO Tang Yan along with a group of investors offered to acquire “China’s Tinder” for $18.90 per share.

What’s unique about this buyout offer is the consortium of investors already controlled 48 percent of the company’s outstanding stock and held 84 percent of the voting power. Despite the strong institutional interest, shares of Momo were still trading at a significant spread from the proposed takeout price.

Source: MCM Partners

Posted-In: China Going PrivateAnalyst Color Long Ideas News M&A Analyst Ratings Trading Ideas Best of Benzinga


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