Hong Kong take-private deals gain momentum as cheap valuations drive investors into company buy-outs
- Hong Kong-listed firms have been involved in US$4 billion worth of take-private deals already in 2024, compared with US$1.2 billion for all of last year
- The growing buy-out trend is a potential headache for the Hong Kong bourse, which had been struggling to attract new listings as the market has languished
This week, CIMC Vehicles, one of China’s top truck manufacturers, offered HK$1.1 billion (US$140 million) to buy back all its own Hong Kong-listed shares not held by its major shareholder and delist from the exchange. Chinese sportswear giant Li Ning is being taken private by its eponymous founder after a 70 per cent plunge in its stock price last year, according to media reports.
Hong Kong-listed firms have been involved in US$4 billion worth of take-private deals already in 2024, compared with US$1.2 billion for the whole of last year, according to data from Dealogic. Buyers have often cited undervalued shares as a reason for the deals.
For CIMC Vehicles, the low liquidity and cheap valuation have “created difficulty for the company to effectively conduct fundraising exercises on the Hong Kong stock exchange”, it said in a filing to the exchange earlier this week.
Similarly, state-owned Sinopharm Group last month proposed to privatise China Traditional Chinese Medicine Holdings via a HK$15.6 billion stock reorganisation plan because of its low share price and the trading multiples of comparable companies.
The current function of the listed company as a platform for financing is “restricted” and “it’s difficult to make use of equity financing to provide sources of available funds to finance its business development”, it said.
