Deals

Nisha Gopalan is a Bloomberg Gadfly columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.

Tim Culpan is a technology columnist for Bloomberg Gadfly. He previously covered technology for Bloomberg News.

(Updated )

Qihoo 360 can't seem to catch a break.

While the Chinese internet browser company looks close to finally achieving its $9.3 billion delisting from the New York Stock Exchange, a less optimistic scenario is playing out on the other side of the Atlantic.

Friday is the drop-dead date for Qihoo to get government approval for its $1.2 billion bid for Opera Software, the Norwegian target said Tuesday, without saying which government it was referring to. It could be the Chinese, whose strictures on limiting money flows out of the country have been a hurdle for the North American buyout, or it could be the U.S., on national security grounds.

On Thursday, stock in Opera closed at 61 kroner, well below the 71 kroner-a-share cash offer announced in February, an indication investors aren't convinced the transaction will go ahead.

The purchase is key to Qihoo's strategy. The Beijing-based group is China's top maker of security and antivirus software for both PCs and mobile devices and over the past few years, has entered into the search-engine business, becoming the country's No. 2 behind Baidu.

While Chrome, Firefox and Internet Explorer battle it out for desktop share, the global growth in internet traffic is coming from mobile, which is Opera's strength and makes it big in emerging markets. Because its browser is designed as a lean, low-data alternative to the offerings bundled with most Android and Apple devices, it's popular in Africa and Asian countries like Indonesia and India, even as its overall share of the market has declined.

Smartphone Speed
Emerging markets are leading global growth in mobile broadband connections
Source: Bloomberg Intelligence

As well as providing crucial exposure to emerging markets, the Opera deal would give Qihoo, along with its consortium partners including private equity firm Golden Brick Capital Management, access to one of the few big browsers left that can actually be bought. With a Chinese company as its owner, Opera may also be able to stem its decline in the face of larger rivals with powerful parents.

Definitely Mini
Opera has a much smaller share of the global mobile browser market than Chrome and Safari
Source:NetMarketShare.com

Qihoo could also go deeper into mobile and integrate its products with the Norwegian browser, helping it to lure more advertising, which is the company's primary revenue source. Another plus is that it may assist Qihoo in realizing its stated ambition to expand into overseas markets, and foreign languages.

For China, a successful acquisition would mark a step forward in Beijing's attempts to become more technology independent. Asia's biggest economy has so far failed to develop a software industry on a global scale and even local products for the most part run Western applications and operating systems.

Scoring a win with its NYSE delisting would be a coup, for sure. But missing out on Opera would be a much bigger step in the opposite direction.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

(Corrects stock-exchange reference in the first and last paragraphs. The company is listed on the New York Stock Exchange, not Nasdaq.)

  1. Chrome is owned by Google while Safari is owned by Apple.

To contact the authors of this story:
Nisha Gopalan in Hong Kong at ngopalan3@bloomberg.net
Tim Culpan in Taipei at tculpan1@bloomberg.net

To contact the editor responsible for this story:
Katrina Nicholas at knicholas2@bloomberg.net