http://blogs.barrons.com/asiastocks/2016/04/19/...arrons&ru=yahoo
By Shuli Ren
Autohome (ATHM), a Chinese automobile website, is the latest U.S.-listed Chinese company that seems to be going home.
But this deal is more curious than others because it is messy, it may well turn into a bidding war, and it involves big names such as China’s Ping An Insurance (2318.Hong Kong) and Australia’s Telstra (TLS.Australia).
Autohome’s CEO wants control, while its controlling shareholder that doesn’t understand China’s fast-moving Internet space wants to get out. CEO James Qin has only 3% of the voting rights and Australian telco Telstra has 54% of the company. In an interview with the CEO in August 2014 (this blogger flipped through her old notes), my first question was Tesltra’s role in the company’s daily management and when it planned to cash out.
On April 16, Autohome announced it had received a non-binding management-led buyout offer for $31.50 a share, or $1.6 billion in total, from a consortium including James Qin, Boyu Capital, Sequoia China and Hillhouse Capital. Curiously, the offer was made right after Teltra entered into an agreement to unload a 47.7% stake in Autohome to Ping An Insurance at $29.55 a share. If Telstra’s sale to Ping An goes through, the Chinese insurance company would become Autohome’s largest shareholder. Currently, 39% of Autohome’s shares are free float.
Corporate actions in China are rarely this messy. Are China’s most prominent private equity groups going to start a public bidding war with Ping An Insurance on U.S. soil, or did Ping An act preemptively?
The timing is just so odd.
The $31.50 buyout offer is by no means generous. Autohome closed at $30.16 on Thursday, so the offer represented only a 4.4% takeout premium. Autohome’s earnings more than doubled since it went public at $17 a share in December 2013, but its total returns have not. In particular, retail investors who bought on Autohome’s debut trading day would receive only 4.7% in total returns if this deal goes through.
It is not hard to see why Ping An may want Autohome. The insurance group has a sizable auto insurance and financing business and shut down its own Internet auto business recently. Autohome’s competitor BitAuto (BITA), as well as e-commerce giant Alibaba (BABA), are rumored to be interested in buying stakes in Autohome.
So will Ping An make a better counter-offer? It seems to be calling the shots now with a 47.7% stake.
Australia’s Telstra is now looking stupid in this deal having sold its large stake for cheap less than 12 hours before the better buyout offer. Will Telstra pull out? Interestingly, it still needs Autohome’s board approval to sell its stake to Ping An, and it controls 5 out of the 10 seats. Maybe Telstra can block Telstra?
Minority investors are certainly expecting a better counter-offer. Autohome closed at $31.49 on Monday, a shade shy of the management buyout group’s $31.50.
“The buyer group offered only 4% premium over the last price before the announcement day, below the avg. premium of 18% of the past 18 going-private offers in the internet sector. The offer price implies16x non-GAAP 2016EPE on core business (11x excluding cash), which we see as undervalued given the solid growth ofthe core business,” noted Bank of America Merrill Lynch.
We often hear U.S.-listed Chinese companies complain that their valuations are too low and that U.S. investors don’t understand their business models. But with this kind of shady corporate governance, can they blame investors for discounting them? |
Thread abonnieren
