Recommendation: Long Charm Communications (NASDAQ:CHRM) at $4.47
Target Price: $4.65
We believe Charm Communications is likely to close the go-private deal by late September. The buyer consortium owns shares representing 68.7% of total votes, enabling the buyer consortium to obtain the requisite shareholder approval. The go-private deal values Charm Communication at a deep discount compared with public-traded comparables and precedent transactions, so the downside is limited. Dissatisfied with the offer price, the second largest shareholder may negotiate a higher offer price for minority shareholders, providing optionality in this situation. As a result of these factors, we recommend a long position in the stock.
Charm Communications is a leading advertising agency group in China that offers...