51job.com agrees to US$5.7 billion privatisation deal, latest US-listed Chinese firm to go private
- About 20 US-listed Chinese firms have agreed to take-private deals since beginning of last year, according to Refinitiv
- Take-private transactions come against backdrop of greater US scrutiny of Chinese firms
Chinese human resources and job search provider 51job.com has agreed to be taken private in a deal that valued it at about US$5.7 billion, making it the latest US-listed Chinese firm to dump the public markets in favour of private ownership.
The transaction followed a nine-month engagement with Beijing private-equity firm DCP Capital, which was first revealed in September. The company, which went public in the US in 2004, formed a special committee of independent directors to consider the proposal and other strategic alternatives at the time.
Offered to investors at US$79.05 in cash per American depositary share, the deal represents a 28.89 per cent premium to its closing price on May 3, the day it announced it had received an updated, non-binding proposal to go private. The transaction is expected to close in the second half of 2021.
When compared with US-listed competitors, the daily trading volume of 51job.com has averaged just about half that of Manpower Group, the staffing and recruitment firm headquartered in Wisconsin with a global presence. Over the past 12 months, an average of 231,787 shares changed hands a day, or about just 0.3 per cent of the firm’s total number of common shares outstanding, data from Nasdaq and 51job.com’s filing shows.
Companies with low trading volumes generally make a case that minority shareholders would be better off exiting at a premium through the privatisation offer rather than trying to cash out in the stock market.
A representative for 51job.com did not respond to a request for comment on Tuesday.
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Since the beginning of last year, 20 Chinese companies agreed to privatisation deals worth US$20.5 billion, the largest number of such transactions since two dozen US-listed Chinese companies went private in 2015, according to data provider Refinitiv.
Another reason is low valuations.
“It’s usually a valuation question,” said Marcia Ellis, global chair of private equity group at law firm Morrison & Foerster. “A lot of the China-related companies that are listed in the US suffer a sort of China discount, for various reasons. I think a lot of these people think if their company were listed in Hong Kong or in China they would have a much higher valuation.”
The privatisation push also comes as private equity firms are seeking to deploy more money in Asia.
Asia-Pacific based private equity firms, such as DCP, were sitting on a record US$446 billion in dry powder as of April and the industry’s assets under management is expected to top US$6 trillion by 2025, according to data provider Preqin.
“Asia-Pacific has been an engine driving global growth for more than a decade now and is in the middle of a historic transformation,” Mark O’Hare, Preqin’s founder and CEO, said. “Investor demand to access this fast-growing and diverse region remains robust, while structural challenges to deploy capital are easing.”
However, the US capital market – and its vast investor base – remains appealing to many Chinese firms seeking a higher profile globally or necessary cash to expand.
For some companies, the calculus may come down to shrinking stock prices, low trading volumes and the potential from a more receptive audience with a later listing closer to home.