By firstname.lastname@example.org (InfoseekChina)
(WSJ) Chinese Internet security-services firm Qihoo 360 Technology Co. ‘s $9 billion plan to go private is being done for the right reasons, namely to help its business, an investor in the consortium bidding to take it private said at the Converge technology conference Thursday.
“Qihoo’s main business is network security, so being a Cayman company listed in the U.S. doesn’t fit them very well,” said China Renaissance Chief Executive Bao Fan. “For them, coming back to be a domestically listed company actually helps them business-wise.”
Qihoo’s chairman Zhou Hongyi is leading a buyout group seeking to take the company private for $9 billion, or $77 per share. China Renaissance, Sequoia Capital China and Citic Securities Co. are among the investors joining Mr. Zhou in the buyout bid.
Investors have been skeptical about the Qihoo privatization bid, with the stock trading below $63 Wednesday, significantly below the nonbinding offer price.
Speaking on the sidelines of Converge, Mr. Bao said Qihoo should be among the first companies to be listed in China once the suspension on initial public offerings is lifted. The company is profitable and it has a good relationship with the government, he said. The Chinese government has been investing heavily in network security, where Qihoo is an industry leader.
If Qihoo’s privatization plan goes through and it relists in China, it would be the biggest Internet company listed domestically in terms of market valuation, said Mr. Bao. Any index fund manager would have to include the stock in their portfolio, he said.
Mr. Bao also noted that he’s still worried about many Chinese technology companies receiving hefty valuations in the public and private markets.
Chinese startups are “spending tons of money on burning cash [and] subsidies,” Mr. Bao said. “That model depends on a sustainable supply of capital.”
China’s recent stock-market decline was a wake-up call for many investors who thought the supply of capital was unlimited. Mr. Bao noted that the recent market decline made it clear to investors that capital won’t always be available. “Within a span of two weeks all the liquidity disappeared,” he said.
Mr. Bao’s advice to Chinese companies thinking of listing at home is to think hard about whether the U.S. or Chinese markets are a better home for their company and not just chase the highest valuation at the moment.
China Renaissance has made a name for itself as a leading Chinese investment bank focused on entrepreneurs in the technology industry. They also make some investments in the sector through venture capital funds that they manage.
Source: Wall Street Journal by Rick Carew and Li Yuan
Source:: Qihoo 360’s Plan to Go Private Will Help Its Business, China Renaissance CEO Says