One of the longest and strangest de-listings in the current wave of privatizations by Chinese firms could finally be nearing an end, with word that telecoms software maker AsiaInfo-Linkage (ASIA) has received regulatory approval for a deal to buy out the company. This new announcement is just the latest bizarre twist in this story, as a deal of this size would normally be far too small to require such approval from China’s anti-monopoly regulator. But the approval seems to show that Beijing wants the deal to proceed in its current form, which means we may finally see an end to this strange story.
The AsiaInfo saga began nearly 2 years ago, and is just one in a series of privatization plans by U.S.-listed Chinese firms. Such companies were once investor darlings, as buyers purchased their shares as a bet on the big growth potential of the Chinese market. But a series of accounting scandals dating from 2011 scared off investors, leaving shares of many smaller companies undervalued. Others to de-list in the current wave include Shanda Interactive (SNDA) and Focus Media (FMCN), but AsiaInfo is one of the oldest companies to make such a move.
According to its latest announcement, AsiaInfo has received formal approval for its buyout from the Ministry of Commerce, China’s anti-monopoly watchdog. (company announcement) As I said above, the fact that such a small deal needed this kind of anti-monopoly approval is quite strange. The buyer is an arm of the massive Citic Group (OTC:CHBJF) conglomerate, which has few if any similar telecoms assets that could raise monopoly concerns. What’s more, AsiaInfo as a company is quite small, with only $140 million in revenue in its latest reporting quarter and a current market value of about $850 million.
AsiaInfo said that following the regulatory clearance, its shareholders will vote on the buyout offer from the Citic-led group at a special meeting on December 19. The group has offered to buy out the company for $12 per share. AsiaInfo shares rose 2 percent after the latest announcement and now trade at $11.85, or just below the buyout price.
Frankly speaking, I hope the buyout succeeds — which looks likely — so we can finally reach the end of the AsiaInfo story. This particular buyout has been a long and tortured process, starting with AsiaInfo’s surprise announcement in early 2012 that the Citic group was interested in a deal. That announcement sparked a flurry of interest from other private equity buyers, and AsiaInfo hired a consultant to consider other bids before finally settling on the Citic consortium.
Its decision sparked a sudden and intense series of lawsuits claiming the process wasn’t competitive enough, leading me to suspect that other bidders were willing to pay a higher price and were unhappy about Citic’s selection. But most of those lawsuits have probably been settled by now, and this regulatory nod probably indicates that Beijing prefers to see AsiaInfo purchased by a Chinese buyer rather than a foreign equity firm like TPG or Silverlake. That’s not too surprising, since AsiaInfo sells software to some of China’s top telcos, and network security has recently become a major issue of concern from government leaders in both China and many major western markets.
There’s not much more to write about the looming end for AsiaInfo-Linkage, except that it will represent the disappearance from public markets of one of China’s earliest tech firms to make a New York listing. The company made its IPO back in 2000 during the global Internet bubble, alongside other high-tech start-ups like Sina (SINA), Sohu (SOHU) and NetEase (NTES). Its de-listing will certainly mark the end of an era, but perhaps is also a welcome development for this company that long ago lost its luster for western investors.
Bottom line: AsiaInfo-Linkage is likely to de-list following a special shareholder meeting on December 19, marking the end of an era for one of China’s oldest US-listed firms.