- Reverse merger plan comes amid greater regulatory scrutiny
- S.F. is third logistics company seeking the listing channel
S.F. Express, one of China’s largest delivery companies, is seeking a listing in the domestic market through a reverse merger, the latest of several logistics companies to use the tactic to sell shares to the public.
Shareholders of its parent S.F. Holding Group Co. plan to buy Maanshan Dingtai Rare Earth & New Material Co. through a share swap and use it as a shell company to list the company. The deal would value S.F. Holding at an estimated 43.3 billion yuan ($6.6 billion), according to a statement on the Shenzhen Stock Exchange.
S.F. is the largest private express logistics company in China, according to the state-run China Daily newspaper, with a valuation more than the combined size of smaller rivals pursuing a similar backdoor listing. The strategy is an alternative way to gain market access that can be less bureaucratically cumbersome than the more common initial public offering. Chinese couriers YTO Express and STO Express are still awaiting regulatory approval, according to stock exchange statements.
"Reverse mergers are a potentially faster option for listing,” said Damien Brosnan, the Hong Kong-based co-head of Asia equity capital markets for UBS Group AG. “Regulatory uncertainty can cause delays but as long as there’s no explicit prohibition, they eventually tend to get done."
The three logistics companies are seeking such a listing at a time China’s stock regulator is seeking measures to curb the number of Chinese companies seeking backdoor listings on the domestic equity market, people with knowledge of the matter said. Regulators are concerned the valuations mooted for some domestic backdoor listings are too high and could affect the stability of the stock market, the people said.
Maanshan Dingtai Rare Earth will sell 3.95 billion shares to owners of S.F. at 10.76 yuan apiece in exchange for the S.F. assets, Monday’s statement said. The company will also issue 10 bonus shares and 1.4 yuan in cash for every 10 shares held by current shareholders. Following a second share sale aiming to raise up to 8 billion yuan for projects, minority and public shareholders will hold a 1.9% stake.
The shell company’s shares, halted on April 5, will remain suspended, the statement said.
— With assistance by Regina Tan