21Vianet Group Inc. (NMS:VNET) announced on June 10, 2015 that it received a non-binding go-private proposal letter from Mr. Josh Sheng Chen, Chairman of the Board and CEO of Kingsoft Corporation Limited and Tsinghua Unigroup International Co., Ltd. as a Buyer Group, to acquire all of the outstanding shares not owned by the Buyer Group for US$23.00 in cash per ADS.
Kingsoft’s Comments Give us Confidence in Transaction
On July 22, 2015, Kingsoft (HK: 03888) issued an announcement that provided updates on the go-private process:
“On 22 July 2015, the Buyer Group entered into a consortium agreement (“Consortium Agreement”) in connection with the Proposed Acquisition. Pursuant to the Consortium Agreement, the Buyer Group proposes to form a new company (the “Holding Company”) and to cause the Holding Company to form a wholly-owned subsidiary (the “Merger Subsidiary”), and at the closing of the Proposed Acquisition, the Buyer Group intends that the Merger Subsidiary will be merged with and/or into 21Vianet, with either 21Vianet or the Merger Subsidiary being the surviving company and becoming a wholly-owned subsidiary of the Holding Company.
It is currently expected that the Company will hold approximately 11.03% equity interest in the Holding Company upon completion of the Proposed Acquisition. The Buyer Group’s respective shareholding percentage and amount of capital commitment in the Holding Company will be finalized in due course. Further announcement in respect of the Proposed Acquisition will be made by the Company as and when appropriate in accordance with the Listing Rules.”
Information Arbitrage Opportunity
As far as we know, VNET hasn’t issued a press release about this information. This update from Kingsoft appears to be an indication that the Buyer Group is moving forward with the go-private process amid the unstable capital markets in China. Accordingly, we are slightly more optimistic about the closing of VNET’s proposed go-private transaction.
Additional information regarding status of VNET’s go private transaction
1. Kingsoft (20.1%) and the Chairman and CEO of the company, Mr. Sheng Chen (30.2%) collectively control 50.3% of the voting power according to the company’s 20F 2014 filing.
2. Another member of the Buyers Group, Tsinghua Unigroup, is close to the Chinese government and has rich capital resources.
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