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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