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58.com is the latest Chinese company to delist from US exchanges in a USD 8.7 billion go-private deal

China’s largest online classifieds platform’s post-privatization future is uncertain, while analysts hint at “home” relisting option.

photo: stock.tuchong.com

Beijing-based 58.com (NYSE: WUBA), China’s largest online classifieds platform, announced on Monday that it has entered into a definitive agreement to be fully acquired by a consortium of investors for USD 8.7 billion to subsequently merge with Quantum Bloom Group Ltd, according to a company’s press release.

The consortium includes Warburg Pincus Asia, General Atlantic Singapore Fund, Ocean Link Partners Limited, and Jinbo Yao, chairman and CEO of the company. Ocean Link was the first to propose to buy out 58.com, KrASIA reported in early April.

Buyers will pay USD 56 for each American depositary share (ADS), representing a premium of 19.9% compared the closing price of the company’s ADSs on April 1, 2020, the last trading day prior to the announcement of the buy-out proposal.

The consortium intends to fund the merger through a combination of cash contributions from investors, rollover equity contributions from certain shareholders of the company, and proceeds from committed term loan facilities in an aggregate amount up to USD 3.5 billion from Shanghai Pudong Development Bank.

The deal, which is expected to close during the second half of 2020, is subject to customary closing conditions including the approval by shareholders representing at least two-thirds of the voting power.

The premium shows that the participating investors are bullish on 58.com, said Ouyang Rihui, vice dean of the China Center for Internet Economy Research of Central University of Finance and Economics, according to a report from the local newspaper Economic Times, on Tuesday.

Ouyang added that investors will adjust 58.com’s development strategy, business focus, and governance structure to help the company grow and list on another stock exchange, without indicating where the destination could be.

One source close to the deal told China Entrepreneur on Monday that 58.com’s privatization move could be the largest privatization deal among US-listed China concept stocks after cybersecurity software developer Qihoo 360 went private in 2016.

China digest

Qihoo received a proposed buyout worth USD 9 billion led by chairman and CEO Zhou Hongyi in June 2015, according to a TechCrunch report. The Beijing-based company delisted from the New York Stock Exchange (NYSE) in July 2016 but later went public in the Chinese mainland (SHA: 601360) in 2017 via a backdoor listing on the main board of the Shanghai Stock Exchange.

Following Qihoo, Semiconductor Manufacturing International Corporation (SMIC), China’s leading chipset foundry, has also delisted from NYSE recently, according to a report of The Telegraph on Monday.

The company, which is still listed in Hong Kong, plans to issue up to 1.69 billion RMB-denominated new shares to public institutional and individual investors and list these common shares on the Shanghai Stock Exchange’s Science and Technology Board, also known as the Star Market, KrASIA reported in May.

The recent update follows a growing trend of Chinese companies looking to Hong Kong or Shanghai as alternatives to US capital markets.

Bitauto Holdings Limited (NYSE: BITA), a leading provider of internet content and marketing services for China’s automotive industry, is also in the process of a go-private deal that will value the company at USD 1.1 billion, according to a firm’s press release on June 12.

While some companies chose to delist and go private, or list in other markets, other large companies have shifted to secondary listings.

Alibaba (NYSE: BABA), which went public in 2014 in the US, got listed in the Hong Kong Stock Exchange (HKG: 9988) in November last year, making it possible for holders of ordinary shares registered on the Hong Kong share to register and convert their shares into ADSs, and vice versa.

Alibaba was one of the first Chinese companies to undertake a secondary listing on the Hong Kong Stock Exchange Photo:Shutterstock.com

Read more: Alibaba shares rise in Hong Kong market debut after completing biggest IPO in 2019

Alibaba’s secondary listing could also serve as insurance against a possible move by US President Donald Trump to delist Chinese companies from US stock exchanges, according to a report by analyst Arun George on Smartkarma. Following Alibaba, NetEase (NASDAQ: NTES) has also gone public in Hong Kong, while JD.com (NASDAQ: JD) will start trading on the Hong Kong stock exchange on June 18, under the stock code “9618.”

Shares of Chinese game developer NetEase (9999), which raised over USD 2.7 billion for its secondary listing, surged 5.7% on its solid debut in Hong Kong on June 10.