21Vianet Chairman and CEO Josh Sheng Chen, Kingsoft Corp., and Tsinghua Unigroup sent the proposal to the company, offering to buy all ordinary shares of 21Vianet for $23 in cash per American depositary share. The offer amount to about $3.83 an ordinary shares.
The data center company's board plans to form a special committee of independent directors to consider the proposal to bring the company private.
21Vianet is a carrier-neutral data center that provides hosting and related services, managed network services, cloud services, content delivery network services, last-mile wired broadband services and business VPN services.
About 2.4 million shares of 21Vianet were traded by 11:35 a.m. Wednesday, above the company's average trading volume of about 783,000 shares a day.
TheStreet Ratings team rates 21VIANET GROUP INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate 21VIANET GROUP INC (VNET) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet Software & Services industry. The net income has significantly decreased by 3417.6% when compared to the same quarter one year ago, falling from -$0.79 million to -$27.75 million.
- Currently the debt-to-equity ratio of 1.83 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with the unfavorable debt-to-equity ratio, VNET maintains a poor quick ratio of 0.92, which illustrates the inability to avoid short-term cash problems.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Internet Software & Services industry and the overall market, 21VIANET GROUP INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The share price of 21VIANET GROUP INC has not done very well: it is down 14.13% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- 21VIANET GROUP INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, 21VIANET GROUP INC reported poor results of -$0.85 versus -$0.13 in the prior year. This year, the market expects an improvement in earnings ($1.67 versus -$0.85).
- You can view the full analysis from the report here: VNET Ratings Report