Analysts and investors in the Chinese economy are carefully taking notes as the largest leveraged buyout in China proceeds.
Private equity firms, including the Carlyle Group, are bidding on Focus Media Holding Ltd, a Chinese advertising company. As of mid-August the bidders have made only a “non-binding” offer of $27 for each ADR (American Depositary Receipt) or share. This offer represents a 15 percent increase in the value of Focus Media’s stock as of August 10th.
Other Chinese companies have seen increased values in their own ADRs as short-sellers showed interest in them as well. The bidders on Focus Media include Citic Capital Partners as well as the CEO of Focus Media Jason Nanchun Jiang. Their offer values the company at $3.5 billion.
Sachin Shah, a special-situations and merger-arbitrage strategist at New Jersey-based Tullett Prebon Plc said that this offer
“is another example of how Chinese are taking more and more of their companies private. The U.S. market isn’t properly valuing them and doesn’t know if the offer price is right, allowing the management of the companies to possibly win in getting the assets at lower valuations.”