Will Qihoo Accept CEO-Led $9B Go-Private Bid?
Will Qihoo accept the CEO-led $9B go-private bid?
That would certainly seem to be the case since Qihoo 360 Technology (QIHU - Snapshot Report) CEO Zhou Hongyi alone owns around 16% of the company, and he is leading a group that is willing to pay $77 a share, or a 13% premium to Tuesday’s closing price. If the 6% jump in the share price is any indication, the deal has the blessings of other shareholders as well.
The idea seems to be that delisting from the U.S. and dismantling the VCE structure will make it eligible to apply for listing back in China. The Chinese government has been relaxing its grip on the financial markets, making it more conducive for local players wishing to raise funds.
But that isn’t the only reason the Chinese romance with the U.S. stock markets is coming to an end.
The Chinese stock market is on a huge bull run and listing in China will fetch much higher valuations. For instance, analysts at CICC, a major investment bank in China estimate that if Qihoo relisted in China, it would be valued at around $61.3 billion.
This may not be so far-fetched if you consider that other technology companies have seen their valuations rise after heading back home. A case in point is LeShi, or LeTV, which reportedly has had a great run this year and is currently valued at around $23 billion.
Chinese gaming companies Shanda Games, Perfect World and Giant Interactive have all delisted and China Mobile Games and Entertainment (CMGE - Snapshot Report) is also apparently thinking along the same lines.
Qihoo is of greater stature, with one of the largest search engines in China – after Baidu (BIDU - Snapshot Report) – and popular security software on offer.
Credit Suisse analyst Dick Wei says that technology stocks are highly under-represented in the Chinese stock markets with only 24 of the 2,698 listed companies being Internet stocks. So these companies are highly overvalued (153X this year’s average, according to Wei).
Note that both CMGE and E-Commerce China DangDang (DANG - Snapshot Report) also jumped yesterday in anticipation of similar offers. So this seems like a great opportunity to hang on to Qihoo stock until the deal is done and also pick up other Chinese names such as DANG.
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