2020 saw an increase in take-private transactions for Chinese companies listed overseas. Whilst there are various factors driving a listed company to go private (i.e. companies undertaking internal restructuring and reducing compliance costs etc.), the low market valuation of the overseas stock markets and the increasing difficulty to raise funds, along with the heightened regulatory regime in the US for Chinese companies listed in the US are likely key factors driving this trend, which is set to continue in 2021.
For instance, the Hang Seng Index in Q1 2020 fell from around 28,000 in early January to around 23,000 in late March amid the coronavirus outbreak, and only slowly regained at the end of 2020. This means that assets of companies listed on The Stock Exchange of Hong Kong Limited (SEHK) are priced at less than their stated worth, which makes it easier for the controlling shareholders to buy out other shareholders at bargain prices. According to Thomson Reuters, the total value of buyouts of Hong Kong-listed companies stood at US$22.5 billion for the year through mid-December 2020, up 160% from the same period in the year before, and the highest since 2017. The number of take private transactions - at 54 - is already an annual record, according to Refinitiv data.
King & Wood Mallesons (KWM) has maintained strong momentum in this space and has been actively advising on take private financings for listed companies and trust funds across the PRC, Hong Kong SAR and the US markets.
New Century Real Estate Investment Trust (SEHK)
This transaction involved a very substantial disposal of the target Spearhead Global Limited and the sale loan to Huge Harvest International Limited, the offeror and a substantial holder of New Century Real Estate Investment Trust, the first China-based hotel REIT in the world, for the privatisation and delisting of New Century Real Estate Investment Trust from the SEHK.
The executive directors of huifu.com made an offer for the privatisation and delisting of huifu.com from the SEHK by way of scheme of arrangement. huifu.com is a leading independent third-party payment technology company in the PRC that provides innovative payment and fintech solutions. It was known for being the first business of its type to list in Hong Kong.
New Wave MMXV Limited, a company controlled by Charles Chao, Sina’s chairman and chief executive, acquired all outstanding shares of Sina for the privatisation and delisting of Sina from NASDAQ. Sina is a leading social media platform with a focus on the Chinese community in the PRC and worldwide and is also among the first Chinese technology companies to be listed in the US two decades ago.
An investor consortium backed by Warburg Pincus, General Atlantic, 欧瓴投资 and 58.com’s chairman Jinbo Yao completed the take-private of 58.com, the biggest online classified advertisement marketplace in the PRC.
Haier Electronics Group Co., Ltd. (SEHK)
This transaction involved the new issuance of H-shares by Hong Kong-listed Haier Smart Home Co., Ltd. and the partial cash payment from its Hong Kong-listed subsidiary for the privatisation of Haier Electronics Group Co., Ltd. by way of scheme of arrangement. Haier Smart Home Co., Ltd. is a smart home ecological brand that customises better life solutions for global users. Upon completion, Haier Smart Home Co., Ltd. would become an “A+D+H” triple listing model.
A glass manufacturer (SEHK)
The offeror acquired all issued shares and all outstanding convertible bonds of a leading float glass and the major reflective glass manufacturer in the PRC by way of voluntary conditional cash offers.
A clean energy company (SEHK)
The offeror acquired all H-shares of a Chinese clean energy company by way of voluntary conditional cash offers.
The following privatisation financings were led by partners Jessica Zhou in Hong Kong, Stanley Zhou and Simon Xu in Shanghai.
With a strong track record in privatisation financings and the ability to provide one-stop-shop legal support in respect of the laws of the PRC, Hong Kong SAR, US and laws from other jurisdictions, KWM is uniquely positioned to capture opportunities arising from this trend.
Any reference to “Hong Kong” or “Hong Kong SAR” shall be construed as a reference to “Hong Kong Special Administrative Region of the People’s Republic of China”.