Coming Home – Overview of Going Private Transactions of U.S.-Listed Chinese Companies

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Source: Morrison Foerster
Article Authors: Ruomu Li, Marcia Ellis, Alice Li, Elba Ding
Published: August 2020

Since the early 1990s, the U.S. stock exchanges have long been home to many prominent Chinese companies as they tried to attract a wide spectrum of investors and enhance their global profile. However, waves of the reverse trend – of those U.S.-listed Chinese companies going private with the ultimate goal of relisting in China – have come and gone in the past 10 years, with this year representing the most recent and perhaps ultimate wave as Chinese companies abandon what they see as a very unwelcoming U.S. market.

While the traditional reasons that public companies choose to delist are still relevant for U.S.-listed Chinese companies’ decision to go private (such as reduced compliance costs and burdens, better focus on the company’s long-term development goals, and more control over the company’s shareholder base), growing political and trade tensions between China and the United States, heightened regulatory scrutiny of U.S.‑listed Chinese companies by U.S. regulators, and potential high trading multiples upon relisting in China appear to be the key drivers for the recent wave.

These going private transactions can present attractive investment opportunities for PE houses as the controlling shareholders/management of many U.S.-listed Chinese companies with great prospects and solid fundamentals feel pressure to take their companies out of the U.S. market and require partners with cash and corporate finance expertise to do so.

In this article, we will elaborate on the following topics:

1. A Typical Going Private Transaction: What is a typical going private transaction of a U.S.-listed Chinese company?

2. Key Players and Their Roles: What are the key players’ roles, objectives, and strategic considerations?

3. Key Procedural Steps and Indicative Timeline: What is the approximate timetable setting forth the key procedural steps from submission of a going private proposal?

4. Key Strategic Considerations: Such asBuyer Consortium, Special Committee, Deal Certainty, Schedule 13E-3 and the SEC Review

5. Conclusion: What to look ahead for?

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