- Chinese regulator requires funds to be transferred in batches
- Investors earlier aimed to complete biggest buyout by end-June
Qihoo 360 Technology Co., owner of China’s second-biggest search engine, said the investors behind its $9.3 billion buyout expect to close the deal before mid-August, missing an initial completion target.
The consortium, led by Qihoo Chairman Zhou Hongyi, is “continuing to work diligently” toward satisfying the remaining deal conditions, according to a statement distributed by PRNewswire on Tuesday. Qihoo said in December it expects the deal to close in the first half of 2016, and last month it announced the buyer group reported its work toward completing the acquisition was progressing “as expected.”
The Qihoo buyout group agreed to Chinese regulators’ request to transfer the buyout funds offshore in several batches, after trying unsuccessfully for approval to send the money overseas in a single go, people with knowledge of the matter said earlier Tuesday. It still needed to move more than $2 billion out of the country as of last week, according to two of the people, who asked not to be identified as the information is private.
Qihoo’s U.S.-listed shares fell as much as 1.5 percent in early trading in New York on Tuesday, compared to a 1.4 percent rise in the NYSE Composite Index.
China has been seeking to control fund outflows amid a $48.5 billion wave of privatization offers for U.S.-listed Chinese companies since the start of last year. The government wants to avoid encouraging too many buyouts of overseas-traded companies that could increase depreciation pressure on the yuan, people with knowledge of the matter said last month.
China’s State Administration of Foreign Exchange had been scrutinizing the Qihoo deal and negotiating with the investor group on the amount of funds it would be allowed to send offshore in each batch, people with knowledge of the matter said last month. SAFE officials were also requesting additional documentation on the transfers to ensure they comply with regulations designed to prevent capital flight, the people said at the time.
Chinese companies need approval from SAFE to convert large sums of yuan into U.S. dollars. SAFE didn’t immediately respond to faxed queries from Bloomberg. Liu Li, a spokesman for Qihoo, declined to comment beyond the statement. Qihoo’s Zhou didn’t immediately respond to two mobile-phone text messages seeking comment.
Ping An Insurance (Group) Co., Sequoia Capital China and Citic Guoan Information Industry Co. are also part of the Qihoo buyout group, according to the December announcement. Qihoo would be the biggest buyout of a U.S.-listed Chinese company, according to data compiled by Bloomberg.
More than 50 such take-private offers have been announced since the beginning of 2015, as companies were lured by the prospect of relisting at higher valuations in Shanghai or Shenzhen, the data show. Qihoo won shareholder approval for the buyout March 30 and got the green light from China’s state planning agency, the National Development and Reform Commission, the next month.
The parties have the right to terminate the merger agreement if it hasn’t been completed by Sept. 18, according to a regulatory filing in December last year.
— With assistance by Heng Xie, and Steven Yang