NEW YORK ( The Deal) -- More Chinese executives are looking to take their U.S.-listed Internet companies private in hopes of attracting higher valuations back home, with Zhaopin ( ZPIN) and YY Inc. ( YY) among the candidates for management buyouts.
Beijing-based social-networking company Momo Inc. (MOMO) announced on Tuesday that it has received a go-private offer from Chairman and CEO Yan Tang, as well as Matrix Partners China II Hong Kong Ltd., Sequoia Capital China Investment Management LP and Huatai Ruilian Fund Management Co. Ltd. The group proposed to acquire the Momo shares it doesn't already own for $18.90 per American depositary share, or $5.3 billion.
The proposal came just a day after mobile-game maker iDreamSky Technology (DSKY) announced it had retained Duff & Phelps LLC as its financial adviser and Shearman & Sterling LLP as its legal counsel to evaluate Chairman and CEO Michael Chen's June 15 offer to acquire the company for roughly $1.2 billion.
The stream of go-private offers is taking place as China's financial market has rebounded over the past year and has started to particularly value Internet and high-tech companies, said Summit Research Partners analyst Henry Guo, adding that the scarcity of such companies in China allows them to fetch higher valuations.
"Some of these companies have a domestic customer base with a much better understanding of the company and its business model," Guo explained.
In addition to Momo and iDreamSky, Internet data-center provider 21Vianet Group (VNET), social-networking company Renren (RENN) and Internet services provider Qihoo 360 Technology (QIHU) all have received go-private offers from their CEOs this month.
Beijing's 21Vianet, which has a $1.8 billion market capitalization, said last week it had formed a special committee in response to an offer from Chairman and CEO Josh Chen on June 10. Renren CEO Joseph Chen also proposed on June 10 to take his $931.3 million company private. Finally, Qihoo 360, which has a $9 billion market cap, said Friday it had tapped Skadden, Arps, Slate, Meagher & Flom LLP to advise a special committee its board formed to examine the buyout proposal of Chairman and CEO Hongyi Zhou.
Executives of these companies likely plan to take their companies back to China, restructure and go public again in the next two or three years, Guo said, explaining the world's second-largest economy also has recently made it easier for Internet companies to pursue initial public offerings.
The average premium in the recent stream of offers for the Internet companies has been about 20%, he explained, noting that such a price tag isn't "that great." At the same time, companies that have received privatization proposals largely lacked strong business potential and growth rate, according to Guo.
He went on to explain that more privatization proposals will come for Internet companies in China, particularly those with models that U.S. investors don't especially like or understand.