Hong Kong take-private offers set to select up tempo after hitting three-year excessive in 2020

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© Reuters. FILE PHOTO: A Star Ferry boat crosses Victoria Harbour in entrance of a skyline of buildings throughout sundown.

By Kane Wu

HONG KONG (Reuters) – Offers to take Hong Kong-listed corporations non-public are set to speed up subsequent 12 months, having already hit a three-year peak in 2020, as family-owned and different companies reel from financial downturn amid the COVID-19 pandemic, bankers and traders stated.

Personal fairness companies with billions of {dollars} to spend are additionally anticipated to maintain attempting to find targets within the Asian monetary hub, they stated, making them engaging as companions for some tycoons to take their companies non-public.

The overall worth of buyouts of Hong Kong-listed corporations stood at $22.5 billion for the 12 months by means of mid-December, up 160% from the identical interval final 12 months and the very best since 2017, in accordance with Refinitiv information.

The variety of such transactions – at 54 – is already an annual report, in accordance with the info.

“We might even see extra take-private offers in Hong Kong in sectors the place you see valuation dislocation,” stated Jonathan Zhu, Hong Kong-based managing director of Bain Capital Personal Fairness, referring to the distinction between companies’ market and perceived values.

“These are typically companies in sectors which might be out of favour (throughout COVID) however nonetheless generate good yields,” he stated.

Offers within the pipeline embody corporations like semiconductor tools producer ASM Pacific Know-how Ltd and telecom software program supplier AsiaInfo Applied sciences Ltd, Reuters has reported.

The surge comes amid a protracted recession within the monetary hub since 2019’s pro-democracy protests, with the Hong Kong financial system shrinking 3.5% within the third quarter because the pandemic and wider geopolitical tensions dimmed development prospects in lots of sectors.

“The protracted impact on valuations from Hong Kong’s social unrest, U.S.-China commerce battle, Nationwide Safety Legislation and COVID continues to be there,” stated Samson Lo, head of Asia M&A at UBS.

“That is made lots of corporations weak,” he stated. “Subsequent 12 months the (take-private) pipeline is much more strong.”

The Hong Kong inventory market is down 6% this 12 months, whereas conglomerates and the property and development sectors are down 30% and 13%, respectively, making them among the many worst performers.

Almost 60% of the take-private offers got here from actual property, industrials, client and retail sectors, as per Refinitiv.

Amongst people who sought to delist this 12 months had been blue-chip stalwarts Wheelock & Co and Li & Fung, with the founding father of Hong Kong style retailer I.T. turning into the newest to aim to take his firm non-public.

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