Yuanxi Zhang
Long/short equity, value, special situations

ChinaEdu Go-Private Deal: Attractive Deal With A Decent Return Of 13.8 Annualized To April 2014

Recommendation: Long ChinaEdu (NASDAQ:CEDU) at $6.85

Target Price: $7.00

Thesis

The go-private deal of ChinaEdu is likely to close by the end of April 2014. Because of the significant ownership by the rollover shareholders and the absence of shareholder lawsuits, we do not expect any difficulties in receiving the shareholder approval, which is the only major condition to close the merger. Moreover, we believe the downside is limited as we think the deal undervalues the company. As a result of these factors, we think CEDU is an attractive deal with decent returns.

Background of the Merger

On June 20, 2013, Mr. Shawn Ding and Mrs. Huang, holders of 43.7% shares, proposed a preliminary non-binding offer for the shares...

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