Taking China private

Author: | Published: 21 Dec 2010

A number of management buyout offers have recently been announced involving US-listed companies with significant operations in China. In many cases these offers have been sponsored by private equity or strategic investors. These going-private transactions present unique issues for the participants that can be a significant hurdle to completing the deal.

Commentators attribute recent buyout offers for US-listed small-cap and mid-cap Chinese companies to their undervaluation. These companies often trade at a meaningful discount to comparable companies on the Hong Kong and Chinese exchanges.

Many of these companies, which achieved public listing through reverse mergers, suffer from weak investor interest and analyst coverage compared to Chinese companies that have gone public through underwritten public offerings.

Participants in the going-private trend include Tongjitang Chinese Medicines Company, a manufacturer of modernised traditional Chinese medicines with American Depositary Shares listed on the NYSE; Harbin Electric, a Nasdaq-listed, electric motor manufacturer; Fushi Copperweld, a...