'Time ripe' for China firms to go private
Chinese companies whose shares are languishing in the United States could delist and return for a bigger impact, says banker
The depressed valuations at which some Chinese companies are trading on stock markets in the United States may prompt their controlling shareholders to take the companies private, a top China banker says.
"Given depressed valuation levels and an environment with abundant liquidity, we expect privatisation activity by Chinese companies, especially in the US market, to remain robust in the foreseeable future," said Brian Gu, head of corporate finance for China at Wall Street investment bank JPMorgan.
In August, about seven years after it listed on Nasdaq, Shanghai-based display-advertising company Focus Media surprised shareholders with a US$3.5 billion plan, backed by management and several private-equity funds, to go private.
If successful, the deal will make it the largest Chinese company to delist itself from a US stock exchange.
Gu's team is advising a special committee of Focus Media on the privatisation offer from a number of private equity firms, including the Washington-based Carlyle Group and Temasek-backed FountainVest Partners. The deal is ongoing.
Prior to the Focus Media privatisation bid, Gu was also the key man involved in the delisting of Shanda Interactive.
Gu believed some companies that might now want to go private could return for a bigger and more important listing after they restructured to become more valuable enterprises. Such privatisation decisions would depend on several factors, he added.