Chinese travel site Qunar joins the delisting bandwagon
Unclear where the online travel platform meaning “where to” in Chinese is going to after privatisation offer from a company owned by 7 Days Inn Hotel owner
China’s second-largest online travel platform Qunar is the latest US-listed Chinese company to go private, in a wave of such firms’ returning to the home market for higher valuations.
Nasdaq-listed Qunar Cayman Islands said in a regulatory filing on Thursday that it has received a non-binding offer from Ocean Management to buy all its outstanding shares at a price that is a 15 per cent premium to the closing price of its American depositary receipts on June 22. Ocean Management is an entity related to Ocean Imagination, a private equity fund focused on investing in travel related industries in China, according to the announcement.
The move comes close on the heels of eLong, another US-listed Chinese online travel agency that is also controlled by the sector’s biggest player Ctrip, completing a 10-month long privatisation process on May 31.
According to US exchange filings, Zheng Nanyan, founder of 7 Days Inn hotel chain and a former Ctrip executive, is the sole director and owner of Ocean Imagination, which invested in the eLong buyout.
Industry insiders say it is likely that Ctrip is behind the buyout bid for Qunar, in which it owns 45 per cent of the aggregate voting rights following a share-swap deal with search giant Baidu, which owns 25 per cent.
Ctrip and Qunar together dominate China’s online flight and hotel booking markets, making a direct acquisition potentially troublesome for antitrust regulators. The online travel agency market in China has boomed with the country’s rapidly-growing aviation market, but cutthroat competition has driven margins down significantly in recent years, leading to an ongoing consolidation.
“Ctrip is in great need for new stories to please investors … they are losing money, so are eLong and Qunar,” said a Shanghai-based financial analyst.
Ctrip on June 15 reported net loss attributable to shareholders of 1.6 billion yuan (US$245 million) in the first quarter, compared to net loss of 126 million yuan a year ago, mainly due to the consolidation of Qunar’s net loss of 1.1 billion yuan.
Nearly 24 Chinese firms listed overseas are reported to be considering delisting from overseas bourses and relisting in China, including Alibaba-backed dating app Momo and internet firm Qihoo 360 Technologies. China’s securities regulator said last month it is studying the market impact of such relistings or back-door listings through acquisitions and restructuring, following market rumours that it may block that channel. Alibaba Group owns the South China Morning Post.
Repacking Qunar and eLong for a relisting in the A-share market is a possibility with good return outlook, though the firms would have to first pass the profitability test, analysts said. “That offers a rosy outlook, but as the Chinese authorities tighten scrutiny on the delisting and relisting attempts of former US listed companies, coming back may not be an easy task,” the Shanghai-based analyst said.
Qunar has been embroiled in a boycott since earlier this year by China’s major airlines, which are pushing to increase their own direct sales online. “In the short term, there is little visibility regarding the airlines boycott on Qunar and the macro environment remains weak,” HSBC said in a report dated June 16.
Qunar said it has formed a special committee of three independent directors to consider the buyout proposal.
Repeated calls to Ctrip’s spokesman seeking comments were not answered.
Qunar shares jumped 10.86 per cent in Thursday’s trading in the US following the announcement, while Ctrip rose by 1.37 per cent.