There are currently more than 20 China -based companies trading below their net cash value. I have covered most of these companies in my previous article series. We are starting to get more and more going private proposals from these undervalued China-based companies. There were already two new deals announced this morning, October 15. There have been six China-based companies with going private proposals since September 7. All six of these companies are still trading below the offer price. These companies could offer attractive risk reward opportunities for investors. Usually these stocks trend higher during the next couple of months in anticipation of closing the deals. Here is a look at these six companies.
1. Yongye International (YONG) is a leading crop nutrient company headquartered in Beijing, with its production facilities located in Hohhot, Inner Mongolia, China. Yongye's principal product is a liquid crop nutrient, from which the company derived substantially all of the sales in 2011. The company also produces powder animal nutrient product which is mainly used for dairy cows. Both products are sold under the trade name "Shengmingsu", which means "life essential" in Chinese. The company's patented formula utilizes fulvic acid as the primary compound base and is combined with various micro and macro nutrients that are essential for the health of the crops. The company sells its products primarily to provincial level distributors, who sell to the end-users either directly or indirectly through county-level and village-level distributors.
Yongye International announced on October 15 that its Board of Directors has received a preliminary, non-binding proposal letter dated October 15, 2012 from Mr. Zishen Wu, the company's Chairman and Chief Executive Officer, Full Alliance International Limited, MSPEA Agriculture Holding Limited, and Abax Global Capital (Hong Kong) Limited, to acquire all of the outstanding shares of common stock of the company not currently owned by the buyer parties in a going private transaction for $6.60 per share of common stock in cash, subject to certain conditions.
2. China Shengda Packaging Group (CPGI) is a leading paper packaging company in China. It is principally engaged in the design, manufacturing and sale of flexo-printed and color-printed corrugated paper cartons in a variety of sizes and strengths. It also manufactures corrugated paperboards, which are used for the production of its flexo-printed and color-printed cartons. The company provides paper packaging solutions to a wide variety of industries, including food, beverage, cigarette, household appliance, consumer electronics, pharmaceuticals, chemicals, machinery and other consumer and industrial sectors in China.
China Shengda Packaging Group announced on October 15 that its Board of Directors has received a preliminary, non-binding proposal from its Chairman, Mr. Nengbin Fang, in which Mr. Fang has offered to acquire all of the outstanding shares of the company's common stock he and his family currently do not own in a going-private transaction at a proposed price of $1.40 per share to be paid in cash. According to the proposal, Mr. Fang intends to fund the acquisition with a combination of debt and equity financing. Currently, Mr. Fang and his family collectively beneficially own approximately 54.03% of the company's common stock.
3. Ninetowns (NINE) is a leading provider of online solutions for international trade, with its key services in automating import/export e-filing.
Ninetowns announced on October 12 that its Board of Directors has received a preliminary non-binding proposal letter, dated October 12, 2012, from certain directors and officers of the company, including Mr. Shuang Wang, Ms. Min Dong, Mr. Xiaoguang Ren, Mr. Kin Fai Ng, Mr. Bolin Wu, Mr. Zhonghai Xu, Mr. Tommy Siu Lun Fork and affiliates of some of these directors and officers, that proposes a "going-private" transaction involving the acquisition of all of the outstanding ordinary shares of the company not already owned by the consortium members at a price per share in the range of $1.80 to $2.00 in cash.
4. 7 Days Group Holdings (SVN) is a leading and fast growing national economy hotel chain based in China. It converts and operates limited service economy hotels across major metropolitan areas in China under its award-winning "7 Days Inn" brand. The company strives to offer consistent and high-quality accommodations and services primarily to the growing population of value conscious business and leisure travelers who demand affordable, clean, comfortable, convenient and safe lodging, and to respond to its guests' needs.
7 Days Group Holdings announced on September 26 that its board of directors has received a proposal letter dated September 26, 2012 from certain existing shareholders of the company, including Mr. Boquan He, Mr. Nanyan Zheng and their respective affiliates, and joint sponsors, including the Carlyle Group and Sequoia Capital China and their respective affiliates, to acquire all of the outstanding shares of the company not currently owned by the existing shareholders in a going private transaction for $12.70 per American Depositary share in cash, subject to certain conditions.
5. 3SBio (SSRX) is a leading, fully integrated, profitable biotechnology company focused on researching, developing, manufacturing and marketing biopharmaceutical products primarily in China. Its focus is on addressing large markets with significant unmet medical needs in nephrology, oncology, supportive cancer care, inflammation and infectious diseases. With headquarters and GMP-certified manufacturing facilities in Shenyang, PRC, 3SBio employs over 800 people.
3SBio announced on September 12 that its Board of Directors has received a preliminary non-binding proposal letter dated September 12, 2012 from its Chairman and Chief Executive Officer, Dr. Jing Lou, and CPEChina Fund, an exempted limited partnership registered under the laws of the Cayman Islands and a China-focused private equity fund associated with CITIC Private Equity Funds Management Co., to acquire all of the outstanding shares of 3SBio not currently owned by Dr. Lou and his affiliates in a going private transaction for $15 per American Depositary Share in cash, subject to certain conditions.
6. Syswin (SYSW) began focusing on providing primary real estate services since 2004 and believes it is a leading primary real estate service provider in China. The company currently has operations in 28 cities throughout China. The company primarily provides real estate sales agency services to property developers relating to new residential properties. Capitalizing on the experience and capabilities gained in Beijing, the company focuses on providing tailored services to its key clients in a number of markets and has been successful in generating repeat business and increasing business volume. Of China's top 30 developers (including those that do not use sales agency services), 15 are or have previously been clients of the company. Clients of the company include some of the most well-recognized national developers in China, including China Vanke, Poly Real Estate, CR Land, Agile Group and Guangzhou R&F Properties.
Syswin announced on September 7 that its Board of Directors has received a preliminary non-binding proposal letter dated September 7, 2012 from Mr. Liangsheng Chen, Chief Executive Officer, President and a director of the company, to acquire all of the outstanding shares of the company not currently owned by him and his affiliates in a going private transaction for $2.00 per American Depositary Share in cash.
Here is a table of 14 Chinese "Going Private" companies. All these deals were announced during 2012. None of these deals are closed yet and all these companies are still trading below the offer price.
|Company||Share price (October 12)||Offer price|
Disclosure: I am long CMM.