The worst rout in Chinese stocks in over two decades hasn’t been bad for everyone.
Three Chinese companies listed in the U.S. received buyout proposals last week from management looking to scoop up firms on the cheap. All three offers were below the stocks’ average price in the 30 days prior to the announcements. Before the Chinese equity tailspin accelerated this month, 23 previous takeover bids this year were made at an average 17 percent premium, data compiled by Bloomberg show.
The more than 150 percent gain in mainland stocks in the year prior to the rout drove a record number of going-private offers in the first half. The wave is continuing even as an unprecedented four-week plunge erased as much as $3.9 trillion in market value on the mainland. As the slump spreads to overseas-listed shares, managers are taking advantage of the opportunity to buy back their companies at steep discounts.
“The end game is to list shares onshore,” Cheng Cheng, an analyst at Pacific Crest Securities LLC, said by phone Friday. “A lot of these buyout deals are led by CEOs or founders who have a lot of company voting stock, so many of the offered premiums aren’t significant.”
E-Commerce China Dangdang Inc., a Beijing-based online retailer, said July 9 that Chairwoman Peggy Yu Yu and CEO Guoqing Li offered $7.812 per American depositary receipt, or 18 percent below the stock’s 30-day average of $9.55.
The $68.50 bid for YY Inc., a Guangzhou-based social networking website, from both its chairman and CEO on July 9 was 4 percent below its average close over the previous month.
The Bloomberg China-U.S. index of the most-traded Chinese companies in the U.S. dropped as much as 18 percent from this year’s June 12 high before climbing 6.1 percent over the past two trading sessions. Dangdang slipped 3 percent Friday to $6.57, while YY rose less than 0.1 percent to $59.36.
China Nepstar Chain Drugstore Ltd., based in Shenzhen, said July 6 it received a $2.60 per share going-private proposal from Chairman Simin Zhang, three percent below its 30-day average.