GEO Investing

A recent RMB 800 million payment, so far as we know only reported in China, is a substantial milestone event for AMCN and we believe the probability that AMCN will complete its go-private deal has substantially increased.  We are optimistic on AMCN’s go-private deal.

On June 15, 2015, AMCN ($4.00) announced that the company has:

“entered into a definitive equity interest transfer agreement (the “Agreement”) with Beijing Longde Wenchuang Fund Management Co., Ltd. (“Longde Wenchuang” or the “Buyer”) to sell 75% equity interest of AM Advertising (the “Transaction”) for a consideration of RMB2.1 billion in cash (the “Consideration”), which reflected the total valuation of AM Advertising of RMB2.8 billion after the completion of the restructuring.”

According to the press release, there will be two installment payments that comprise this RMB 2.1 billion payment. Also according to the press release, the first installment of RMB 800 million was to be paid within 15 working days after the agreement, and the second installment of RMB 1.3 billion is to be paid no later than September 30. 2015.

On June 19, 2015, the company announced that it has received:

“a non-binding proposal letter, dated June 19, 2015, from Mr. Herman Man Guo, Chairman of the Board and Chief Executive Officer of the Company, on behalf of himself and management of the Company (collectively, the “Buyer Group”), proposing a “going-private” transaction (the “Transaction”) to acquire all of the outstanding ordinary shares of AirMedia not already owned by the Buyer Group for US$6.00 in cash per American depositary share (“ADS”), which represents a premium of 70.5% to the closing trading price of the Company’s ADS on June 18, 2015, the last trading day prior to the date hereof.”

The recent correction in the China A share market has caused a price drop for companies that have already received non-binding go-private offers, including AMCN, which is now trading at $4.00 per ADS, representing 50% potential premium if the go-private offer closes. This big premium could reflect investors’ concerns that the company might not be able to complete its go-private process.

AMCN Reportedly Received RMB 800 Million Installment for Advertising Business Sale

However, according to Chinese news on July 7, 2015, AMCN has reportedly received the first installment of RMB 800 million from [Beijing] Longde Wenchuang Fund in its RMB 2.1 billion sale.

Coincidentally, on July 6, 2015, AMCN issued another press release to announce that it had retained Duff & Phelps Securities LLC and Kirkland & Ellis as its advisors. Both Duff & Phelps and Kirkland & Ellis have successfully completed several Chinese companies go private transactions. The press release states the following:

“a special committee of independent directors of the Company’s board of directors (the “Special Committee”) has retained Duff & Phelps, LLC and Duff & Phelps Securities, LLC (collectively referred to as “Duff & Phelps”) as its financial advisor and Kirkland & Ellis (“Kirkland & Ellis”) as its international legal counsel. “

Thus, despite the correcting A share market in the last three weeks, AMCN appears to be still seriously proceeding with its transaction with Beijing Longde Wenchuang Fund and its go-private deal. At the least, this first RMB 800 million payment has made the RMB 2.1 billion transaction legitimate enough and potentially difficult to reverse the deal.

It seems AMCN has the money and desire to continue the go private transaction.

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