* Cash-rich hoteliers, health care companies among those ripe to go private, deal makers say.
* Take private deals in first quarter worth over US$14.6 billion versus US$287 million a year ago, Dealogic says.
There have been 23 take-private deals worth US$14.6 billion this year through Tuesday across Asia-Pacific, the busiest quarter in the past decade, according to Dealogic. There were seven deals worth US$287 million a year ago. The pace this year is matching those seen when stock slumped during the Sars (severe acute respiratory syndrome) outbreak in 2003, bankers said.
As the Hang Seng Index crashed 19 per cent this year, deal bankers in the city are enjoying a prolific month in March as Hong Kong-listed companies made up nearly a third of privatisation deals in the region, according to Dealogic.
The Fung family and Singapore-based GLP Group offered to privatise global supply chain manager Li & Fung for HK$7.2 billion (US$929 million). Billionaire Peter Woo Kwong-ching is taking his Wheelock and Co property empire private, while developer Soho China was planning to sell itself to Blackstone Group for US$4 billion, according to a Reuters report.
“There is a lot of capital at private equity funds, sovereign wealth funds and family offices, so the number of people willing to evaluate go privates is high at this unique time,” said Kerwin Clayton, co-head of M&A across the Asia-Pacific region at JP Morgan Chase.
These juicy windfalls have investors and deal makers eyeing potential candidates among asset-rich companies slammed by the viral outbreak, anti-government protests in Hong Kong, or caught in the crossfire of the US-China trade war.
They include real estate developers, hotel owners, consumer-driven companies outside the food and beverage industry, and discretionary travel-related companies, deal makers said. Health care firms are also attracting private equity firms for spin-offs or privatisation, they added.
Samson Lo, head of M&A in Asia at UBS, said some Hong Kong-listed companies began discussing potential privatisations last year as months of street protests weighed on markets and the city’s economy.
For now, take-private deals are being driven by founders who have deep pockets and value their companies more highly than investors are willing to pay. Barriers are aplenty, though, especially amid a financing crunch.
“Cash-rich firms with significant insider ownership and some visibility on their operating environment is an area where we are seeing people spend time discussing taking a business private,” said JP Morgan’s Clayton.
Another barrier to getting take privates signed is often family fights. Second or third-generation members of a family might have different ideas from the founders about the prestige of running a listed company.
Hong Kong property group Hopewell did push through a HK$21.2 billion privatisation last year, but not without some drama.
Gordon and his wife Ivy Wu controlled the buying consortium. However, Gordon’s son and heir-apparent, Thomas Jefferson Wu, who is also a Hopewell shareholder and its deputy chairman, was not part of the buying consortium.
Published: 1st April 2020.