Opinion | AsiaInfo-Linkage buyout: a lawsuit magnet

I've been following China company news for quite a while, so I'm quite accustomed to seeing law firms file the occasional shareholder lawsuit when a company's stock price falls on unexpected bad news. But a flood of announcements these last few days threatening lawsuits related to the new buyout offer for telecoms software maker AsiaInfo-Linkage (Nasdaq: ASIA) has surprised even me, potentially derailing the deal as suspicion grows of insider activity.

At the end of the day, all of the law firms that have suddenly taken an interest in this case may simply be hoping to get a higher price for the company, which received a buyout offer earlier this week from a group led by the private equity arm of Chinese financial conglomerate Citic Group. Citic had first expressed an interest in buying out AsiaInfo more than a year ago, but took quite a while to finally reach a deal. When that finally happened, the offer price offered little or no premium to AsiaInfo's latest share price, even though that price was well above levels from when reports first emerged about a potential buyout.

I honestly can't comment too much on the pricing of this deal, which values AsiaInfo at about US$900 million - less than half of what it was worth just three years ago when Chinese tech firms were still a darling of US investors. But I do have to say there are some unusual signals around the deal that perhaps are making some investors suspicious.

Whereas most of the buyout offers so far for firms like Camelot Information Systems (NYSE: CIS) and Simcere Pharmaceutical (NYSE: SCR) have come from management-led groups, this AsiaInfo buyout offer comes from an unrelated outside bidder. That bidder also happens to be a major Chinese conglomerate with strong state connections. At the same time, one of AsiaInfo's major stakeholders is Edward Tian, who owns nine per cent of the company and is also a well-connected player in China's tech, media and telecoms industries.