More Chinese firms go private

Updated: 2013-05-24 15:20

By Michael Barris in New York (China Daily)

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Continuing a flurry of going-private deals involving US-listed Chinese companies and private equity firms, Pactera Technology International Ltd, a Chinese information-technology outsourcing company, has received a bid to be taken private by Blackstone Group LP of the US for $680.4 million.

New York-based Blackstone, one of the world's largest private equity firms, offered $7.50 for each of Pactera's Nasdaq-traded shares, or a 43 percent premium to the Dalian-based company's closing stock price before the offer was made. Before news of the offer, Pactera's stock had lost about two thirds of its value over the past year. Pactera shares have since surged, helping to drive up shares of US-listed Chinese stocks.

The deal is expected to boost Blackstone's revenue due to China's rapid economic growth. The firm has more than $166 billion in assets under management and has stakes in hospitality chain Hilton Worldwide, office landlord Equity Office Properties Trust and The Weather Channel.

The offer comes a week after Chinese telecommunications software maker AsiaInfo-Linkage Inc agreed to be taken private for almost $900 million by a group led by Chinese private-equity firm Citic Capital Holdings Ltd.

Were Pactera to accept the offer, it would continue an exodus of US-listed Chinese companies from the US stock markets as companies weigh the value of a US listing against the challenge of trying to soothe investors worried by scrutiny by US regulators and short-sellers.

Pactera was formed through a November merger of HiSoft Technology International Ltd and VanceInfo Technologies Inc.

"Some of the China names that once were darlings and since have fallen from grace are especially appealing" to investors, Jeff Papp, a senior analyst at Oberweis Asset Management Inc in Illinois, was quoted as saying by Bloomberg News. Papp said these companies could seek listing in Hong Kong in a few years after leaving the US stock market.

Last year, at least 25 US listed companies based in China announced plans to go private through buyouts, as investors dumped shares amid regulatory investigations and short-sellers' scrutiny. About 50 mostly small Chinese firms withdrew registrations with the Securities and Exchange Commission, up from 40 in 2011.

The biggest going-private deal to date is Focus Media Holding Ltd's August 2012 agreement to be acquired for $3.7 billion by a consortium led by US private-equity firm Carlyle Group LLC. the decision by the Chinese digital-advertising company followed a steep drop in its stock price that was tied to allegations in 2011 by shortselling firm Muddy Waters LLC that Focus Media had, among other accounting irregularities, overstated the number of liquid-crystal-display screens it used to display ads in China. That deal is expected to close sometime this month.

In December, amid a rash of alleged accounting fraud by US-listed Chinese companies, the SEC sued Chinese affiliates of accounting firms for failing to turn over audit information on a number of unidentified Chinese companies. When the firms refused to comply with the demands to protect what Chinese law views as state secrets, shares of many US-listed Chinese companies tumbled.

AsiaInfo, a Beijing-based telecommunications software developer, agreed to be bought by private investors for $12 per share on May 13, 52 percent above the level on Jan 12, 2012, a day before it received the going-private offer.

(China Daily USA 05/24/2013 page10)