Chinese firms change tune on US exchanges

By Paul Mackintosh - 07/04/14

Here’s an announcement that came out just after April Fool’s Day but that definitely was no joke: Noah Education Holdings Ltd, “a leading provider of education services in China” which happens to be listed on the New York Stock Exchange, is delisting from the NYSE under the auspices of Morgan Stanley Private Equity Asia (MSPEA), following a go-private offer rated at a 26.7% premium to its share price on its last trading day prior to the offer (December 23, 2013) and a 49% premium to the 180-day average price prior to the offer. Noah will then merge with Rainbow Education Holding Ltd, a consortium investment vehicle of MSPEA, Baring Private Equity Asia, and others.

Noah “owns and operates 48 high-end kindergartens located in the Guangdong Province, Hunan Province and Yangtze River Delta. It owns and operates five primary and secondary schools, which are all based in Guangdong Province”, and owns other educational assets. The total transaction “implies an equity value of the company of approximately US$107.4 million”, according to its announcement.

This transaction harks back to the glory days of PRC company delistings, such as the $3.7 billion exit of Focus Media Holdings from the NASDAQ in May 2013, financed by the Carlyle Group in partnership with CDH Investments, China Everbright, Citic Capital Partners, FountainVest Partners. Such deals led to an estimated $5.8 billion of privatisation bids with PRC companies seeking to delist in the first nine months of 2013, according to Dealogic data. And interestingly, Focus Media was back in the news recently with the prospect of a $1 billion IPO in Hong Kong, with Carlyle still on board. Private equity firms obviously find value in these US listing divorcees, and with the opportunity to launch such a lavish IPO, one can see why.

But while the kind of aggressive short-selling tactics that supposedly drove Focus Media and its ilk out of the US markets appear long past. Muddy Waters, the Carson Block-led research firm that launched the PRC stock short-selling trend a few years back, has widened his list of targets to include UK online ad sales firm Blinkx, Singapore-listed commodities trader Olam International Ltd, and others in international markets, though he has not dropped the China theme entirely. One suspects simply that Chinese companies are now ready to evaluate listings on major US exchanges, or exits from them, on their merits, and are no longer either eager to float or in a hurry to leave.