Blackstone Stands Out as Buyouts to Slow: China OvernightBelinda Cao and Ye Xie
The rally that’s sent Chinese stocks listed in New York to a two-year high is also signaling a slowdown in takeovers.
The gap between buyout offers made by potential suitors and the share prices of the target companies dropped to 20 percent last quarter, the smallest premium since 2010, from 31 percent in the April-to-June period and 39 percent in 2012, data compiled by Bloomberg show.
The shrinking price differential means there’s less incentive for Chinese companies to entertain takeover offers like the one Blackstone Group LP made for Pactera Technology International Ltd. last week, curbing deals after they soared to a record in 2012, according to Mark Tobin, managing partner at Tobin Tao & Company. The Bloomberg China-US Equity Index of U.S. listed Chinese stocks fell from the highest level since 2011.
“We would expect further slowing in buyout activity,” said Tobin, whose advisory firm follows Chinese stocks listed in the U.S., in a phone interview from Orange County, California, on Oct. 18. “There are simply less candidates, along with the improved stock performance encouraging companies to maintain their listings.”
Chinese companies have sought buyout deals to withdraw from U.S. listing since 2011 as concerns over corporate governance and the quality of their accounting pushed down share prices and depressed valuations. The go-private deals increased to a record 19 last year, from 14 in 2011 and five in 2010. So far this year, 13 deals have been announced.
Pactera, a provider of technology outsourcing services based in Dalian, China, jumped 8.1 percent on Oct. 17 after it accepted an offer of $7.30 per American depositary receipt from the Blackstone-led consortium.
The deal represented a 39 percent premium over the closing price on May 17, the last trading day when an initial offer of $7.50 was announced.
RDA Microelectronics Inc., a Shanghai-based maker of semiconductor components, received a non-binding takeover proposal Sept. 27 from state-owned Shanghai Pudong Science and Technology Investment Co. for $15.50 each ADR, which was a 12 percent premium to the previous day’s closing level. The deal is valued $625 million.
The buyout group is unlikely to raise the offer for RDA, Jay Srivatsa, an analyst at Chardan Capital Markets LLC wrote in a note Oct. 17, after RDA said it will miss third-quarter sales forecast by as much as 27 percent.
Other proposals announced during the quarter include a $326 million offer to buy China Hydroelectric Corp and a $28 million deal for Charm Communications Inc., a digital advertising company based in Beijing.
The Bloomberg China index lost 1.1 percent to 105.98 at 11:34 a.m. in New York. The measure gained 2.3 percent last week, led by NQ Mobile Inc. and Baidu Inc.
China’s gross domestic product rose 7.8 percent in the July-September period from a year earlier, the fastest expansion since December, the National Bureau of Statistics said in Beijing on Oct. 18.