China’s Record $26 Billion Buyout Deals at Risk of Unraveling

  • Regulators consider measures to curb backdoor re-listing
  • 21Vianet Group, Momo trade at large discounts to offer prices

China's U.S. Buyout Deals at Risk

The great retreat of Chinese companies from the U.S. stock market is hitting a snag.

Concern last week that Chinese regulators may restrict overseas-traded companies from returning home helped erase more than $5 billion in the market value of firms seeking to do so. Shares of companies from Momo Inc. to 21Vianet Group Inc. have plunged at least 20 percent since May 6 amid speculation that the management-led investor groups may back away from the buyout deals or lower their purchase prices.

The selloff marks another twist in the saga of U.S.-listed Chinese companies seeking to go private, lured by the prospect of relisting at higher valuations in Shanghai or Shenzhen. More than 40 have received buyout offers worth at least $35 billion since the beginning of 2015. About three quarters of the deals are still pending, including Qihoo 360 Technology Co., whose $9.3 billion offer is the largest.

The unraveling started on May 6 when the China Securities Regulatory Commission said that it’s studying the impact of companies seeking to relist domestically after withdrawing from overseas. The regulators are concerned the valuations estimated for some domestic backdoor listings are too high and could affect the stability of the stock market, according to the people familiar with matter. Policy makers also want to avoid encouraging more buyouts that could prompt capital outflows, the people said, asking not to be identified as the information is private.

Below is a table comparing the U.S.-listed Chinese companies with the largest differences between their share prices and buyout offers. The widening of the offer premium indicates increasing concern that the deals will complete.

Company NameClosing Price ($)Offer Price ($)Premium (%)Premium A Week Ago
China Information1.204.43269.17216.43
21Vianet 13.662368.3723.26
YY 44.8568.552.7320.98
Trina Solar7.9411.646.1031.52
iKang 17.982539.0417.65
Jumei 5.29732.3315.51

Note: share prices are as of May 13.

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