The author is Nina Xiang, editor of China Money Network
If you happen to be a public stockholder of NASDAQ-listed Chindex International, Inc., enjoy it while you watch the world’s two biggest private equity firms fight for your shares.
Both are hoping to acquire 100% of Chindex International, the operator of the high-end United Family hospitals in China.
The saga began on February 17, when Bethesda, Maryland-headquartered Chindex says it entered into a definitive merger agreement with TPG Capital; Shanghai Fosun Pharmaceutical (Group) Co., Ltd.; as well as Chindex’s founder and CEO, Roberta Lipson, to take the company private for US$19.50 per share in cash.
On April 14, Chindex says that another investor, which was identified as the Carlyle Group by Chinese media reports, proposed to buy out Chindex at US$23 per share. The price represents an 18% increase from TPG’s original offer.
Then on April 21, the original buyer consortium including TPG, Shanghai Fosun and Chindex CEO Roberta Lipson, raised its offer to US$24 per share. This is 23% higher than its previous bid.
Such an increase is certainly a welcome change for investors in U.S.-listed Chinese companies.
Since 2010, there have been 17 Chinese companies that completed privatization deals with deal value above US$100 million, according to data tracker Dealogic. That amounts to over US$10 billion in combined deal value.
But most of those deals were announced between 2010 to 2012, when prices of U.S.-listed Chinese companies got hammered by negative reports on their questionable accounting practices.
Halter USX China Index, an index comprised of the U.S.-listed companies that derive a majority of their revenue from China, has seen the price of an ETF (exchange trade fund) based on it hovering around US$25 between 2010 to 2012.
It dropped to a low of US$17 in the summer of 2012, before rebounding to a high of US$33 last month.
So, between 2010 and June 2013 when share prices of U.S.-listed Chinese companies were depressed, 52% of privatization deals offered premiums (offer price over pre-announcement trading price) between 21% to 40%, according to a report published by Houlihan Lokey Capital.
For Chindex’s deal, TPG’s original deal of US$19.50 per share represented only a 14% premium of the company’s pre-announcement price. Now, at its revised higher offer, it represents a 40% premium.
That is more in line to what investors should get.