7 Days seeks to delist from US market

PUBLISHED : Friday, 28 September, 2012, 12:00am
UPDATED : Friday, 28 September, 2012, 2:54am

Mainland-based budget hotel operator 7 Days Group Holdings has received an offer to be taken private by a consortium of investors, including its co-chairmen, making it the latest Chinese company to try to delist from the US stock market.

The offer values the Guangdong-based hotel chain, which operates 1,132 hotels on the mainland, at about US$635 million.

It listed on the Nasdaq stock market in 2009, raising US$111 million through an initial public offering.

A group of investors, including 7 Day's co-chairmen and founders He Boquan and Zheng Nanyan, as well as Washington-based private equity firm, the Carlyle Group and the China arm of US venture capital firm Sequoia Capital, have offered to acquire the hotel company's American depositary shares (ADS) at US$12.70 apiece in cash, representing a 20 per cent premium to the shares' closing price on Tuesday, and a 31.8 per cent premium to the past 30 trading days.

Each ADS represents three ordinary shares.

As of August 10, the hotel company had about 150 million ordinary shares outstanding.

The hotel company said in a statement that the deal will be funded by a mix of equity and debt, and that it expects its board to form a special committee consisting of independent directors to consider the buyout offer.

"Cost of privatisation at this juncture is relatively inexpensive," said a person familiar with the situation.

He added that the 7 Days executives "hold a long-term operating vision to develop the hotel chain."

Amid the buyout offer, shares of 7 Days jumped as much as 15 per cent at one point and ended 13.1 percent higher at US$11.95 each on Wednesday.

In the 12 months leading up to the buyout offer, the company's share price dropped more than 23 per cent.

He Boquan owns about 23 per cent of the hotel chain's ordinary shares, while Zheng had a 9.3 per cent stake as of the end of March, according to company's annual report issued in April.