We haven't heard a peep out of the Chinese companies that have received "go private" -- or leveraged buyout offers as we call it -- six to seven months back. A few of the companies that are better known on our shores that have received these offers are YY Inc. (YY), Dang Dang (DANG), Qihoo 360 (QIHU) and E-House (EJ).
The reason these companies received go-private offers from their management teams and other partners is simple: They were trading in the U.S. and, compared to their competitors and peers that traded in China or Hong Kong, they were trading at ridiculously low multiples on our shores.
The management teams put together a group of partners, including venture capital and private equity firms, and thought that they would take their companies private by offering investors a smallish premium to the then-trading price of the American Depositary Shares. They then turned around and re-listed on the Chinese or Hong Kong exchanges at a far higher and richer multiple, thereby making themselves a ton of money.
This, however, happened when the Chinese markets were flying high and before they crashed in July.
Because of the crash in China, the ADS issues of the Chinese companies that trade on U.S. exchanges have been slaughtered, although many have bounced back very nicely since the absurd lows while investors here at home were heading for the hills and selling at any price. Tuesday, E-House received a revised offer from a consortium where the offer was 10% lower than the original offer. The LBO group cited deteriorating results and the Chinese markets crash as reasons for the new, lower offer.
There has been barely a peep out of the sell-side, nor have too many market observers noticed this interesting turn of events, but I can bet we will be seeing many of these original LBO offers revised lower soon, before prices run away as global markets rebound from that Chinese market-induced crash. As for the LBO team, they will get to buy even cheaper and make even more money when the listing window opens in China or Hong Kong and valuations once again are flying high.
For those who hold the ADS in these companies, we were selling out on the cheap but now could be selling out even cheaper.