7 Days Group Holdings Ltd. jumped to a four-month high in U.S. trading after the second-biggest budget hotel owner in China said it received a buyout proposal to take the company private.
The company’s American depositary receipts surged 13 percent in its fourth day of gains to $11.95 in New York, the highest level since May 7. Each ADR represents three ordinary shares.
The board of Guangzhou-based 7 Days received the “non-binding” proposal from a group of private-equity firms led by the Carlyle Group LP and Sequoia Capital, and existing shareholders including the company’s co-chairmen Boquan He and Nanyan Zheng, it said in a statement today. The group plans to purchase all outstanding shares with cash at $4.23 each, or $12.7 per ADR.
The valuations of Chinese budget hotel operators as a group are attractive, Jeff Papp, a senior analyst at Oberweis Asset Management Inc., wrote in an e-mail from Lisle, Illinois. “They generate strong return per hotel investment and there remains plenty of growth.”
The company’s board is expected to form a special committee to consider the proposal with the assistance of a financial adviser and legal counsel, according to the statement.