china finance go private reportsOnce again, the GeoTeam has found an information arbitrage opportunity from China. This time, it involves a non-binding go-private offer that has reportedly been made to China Finance Online (NMS:JRJC).

The company has not filed an 8-K or put out a press release acknowledging this offer and it has not been confirmed that the company has been in receipt of this letter.

As part of news released in China that we touched upon early on December 16, 2015 for our Premium members, the image below of the reported proposal has been circulated.

News in China Reports Involvement of Windsor Capital In Potential China Finance Online Go-Private Proposal

According to a news  report from China, Windsor Capital has sent the non-binding offer to acquire all outstanding shares of JRJC at a price of $8.50 per ADS. Windsor Capital stated last Friday that this non-binding offer has been sent out and because it was sent from Shenzhen, the company may not have received it yet. The company estimated that this non-binding offer would arrive at JRJC’s Board of Directors by today (December 21, 2015) at the latest.

Below is the reported copy, time stamped as of December 16, 2015, of the non-binding acquisition offer shown the news report, with its paraphrased translation regarding some terms of the offer.

Note: We have not verified the authenticity of this document and are providing this image as only a conveyance of our findings and observations.

From our point of view, as long as China Finance Online management or the Board of Directors has received this non-binding acquisition offer, they should be obliged to put out a press release in order to inform their shareholders.

The proposed non-binding acquisition offer price of $8.50 is about a 35% premium compared to JRJC’s current stock price. Although we don’t think the stock of China Finance Online would go as high as $8.50 after an announcement of this proposal, it is possible that it could appreciate from its current levels.

We are still waiting to see when and if JRJC announces receipt of this non-binding offer. Since management together only owns 31.7% of the company (including about 28.5% owned by Zhiwei Zhao, Chairman and CEO, based on the 2014 20F) and they were not in this buyer group, it is possible that if the deal went through that management could be replaced or may need to find the means to maintain control via a counteroffer.

Thus, in order to maintain the control of the company, management may need to cooperate with other funds to try and outbid this offer, or management may ask for a higher takeover price if they decide they want to give up the company.

Original Note to GeoInvesting Members

We had originally sent the following note to our Premium members, on December 16, 2015:

According to the news in China, a private investment institution has proposed a non-binding go private offer to acquire all the outstanding shares of China Finance Online. Below is the text and the translation:

16日私募机构温莎资本透露,目前已正式对中概股:金融界(4.56, 0.25, 5.80%)提出éžçº¦æŸæ€§æ”¶è´­é‚€çº¦ã€‚温莎资本计划收购金融界全部已发行普通股和美国存托股(每股存托股相当于5股普通股),提出以8.5美元每股美国存托股的固定现金价格收购。

当前金融界还没有就收购邀约给出最后回复。按照协议,éžçº¦æŸæ€§é‚€çº¦å¯éšæ—¶æ’¤å›žã€‚但市场人士分析,此举或是金融界借路私有化,温莎资本承担私有化接盘者身份。目前金融界市值仅1亿美金,其账é¢çŽ°é‡‘将近市值一半。在A股,其同行业公司东方财富目前市值接近千亿人民币。

公开信息显示,本次邀约收购发起方温莎资本是国内最早投资海外的资产管理公司之一,主要合伙人包括中概股投资领域著名的基金经理简毅。据悉,此次邀约收购金融界不仅有温莎资本参与,还有其他大型PE(私募股æƒæŠ•èµ„)在身后一起参与这项投资。

一位券商资管人士分析,金融界作为国内最早IPO的财经垂直类互联网上市公司,目前被东方财富、同花顺、大智慧甩在身后,一直让行业人士唏嘘。“A股市场对互联网金融标的估值更高,企业能得到更多资本支持对金融类企业至关重要,金融街私有化回A股市场,相比目前市值有提升空间。”

Translation, as paraphrased:

“On [December] 16, [2015], private investment institution Windsor Capital said that, [it] has officially proposed a non-binding acquisition offer to JRJC. Windsor Capital plans to acquire all of the outstanding common shares and ADS (every ADS equals 5 common shares), proposing to acquire at price of $8.50 per ADS in cash.

Currently JRJC hasn’t given final response to this acquisition offer. According to the terms, non-binding offer can be withdrawn anytime. But based on the analysis from the market participant, this [endeavor] is perhaps JRJC wants to go private, and Windsor Capital will be the taker of this go private transaction. Right now the market capital of JRJC is only $100 million, and its cash balance is almost half of it. In China A share, the comparable company East Money Information Co.,ltd. (SHE: 300059)’s market cap is close to RMB 100 Billion (~USD 15.4 billion).

Public information shows that the proposer of this offer, Windsor Capital, is one of earliest overseas investing asset management companies, and [its] main partner includes famous fund manager in China-based US listed companies area, Yi Jian. It is known that Windsor Capital is not the only participant, but there are some other private equity firms behind to involve in this investment.

One person in the brokerage & asset management industry analyzes that, as the earliest IPO-ed vertical financial internet company, JRJC falls behind East Money information (SHE: 300059), Hithink RoyalFlush Information Network Co.,Ltd. (SHE:300033), Shanghai DZH Limited (SHA: 601519). “China A share market is valuing internet financial companies at a higher multiple, and companies will be able to get more capital to support the financial-like companies. [If] JRJC goes private and comes back to China A share market, its valuation will have room to grow.”

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