What to consider about going private in the US

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While it was popular for Chinese companies to list their stocks in the US in the past, often via reverse mergers, Chinese companies are now exiting US capital markets and re-listing in other jurisdictions with 26 having been successfully privatised in the last 58 months up until August 2014. Many Chinese companies have been privatised because of undervaluation of stock prices, attacks by short sellers, and/or strategic adjustment.

陆志明 Simon Luk
陆志明 Simon Luk

Although the privatisation process for some companies has gone smoothly, others encountered obstacles and even failed eventually. Compared with Global Education & Technology Group, which spent 30 days to complete its privatisation process, Tongjitang Chinese Medicine Company and Harbin Electric spent over a year. Even CNinsure, the first Asian insurance intermediary company listed in Nasdaq with a valuation of nearly US$1 billion, failed. A privatisation bid fails if there is rejection by minority shareholders and insufficient buyout funds from the offeror.

After privatisation, some companies have successfully re-listed in other jurisdictions. For instance, China Metal Resources Utilization successfully relisted in Hong Kong in February 2014, and raised roughly US$96 million. It was formerly listed on the NYSE as Gushan Environmental Energy and was delisted in October 2012.

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Simon Luk is a partner and chairman of Asia practice at Winston & Strawn. He can be contacted at +852 2292 2222 or by email at sluk@winston.com

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