Hong Kong take-private deals set to pick up pace after hitting 3-year high in 2020

ASMPT

17/12/2020 05:09

By Kane Wu
    HONG KONG, Dec 17 (Reuters) - Deals to take Hong Kong-listed
companies private are set to accelerate next year, having
already hit a three-year peak in 2020, as family-owned and other
businesses reel from economic downturn amid the COVID-19
pandemic, bankers and investors said.
    Private equity firms with billions of dollars to spend are
also expected to keep hunting for targets in the Asian financial
hub, they said, making them attractive as partners for some
tycoons to take their firms private.  urn:newsml:reuters.com:*:nL4N2DM0BZ
    The total value of buyouts of Hong Kong-listed companies
stood at $22.5 billion for the year through mid-December, up
160% from the same period last year and the highest since 2017,
according to Refinitiv data. 
    The number of such transactions - at 54 - is already an
annual record, according to the data.
    "We may see more take-private deals in Hong Kong in sectors
where you see valuation dislocation," said Jonathan Zhu, Hong
Kong-based managing director of Bain Capital Private Equity,
referring to the difference between firms' market and perceived
values.
    "These tend to be businesses in sectors that are out of
favour (during COVID) but still generate good yields," he said.
    Deals in the pipeline include companies like semiconductor
equipment manufacturer ASM Pacific Technology Ltd  0522.HK  and
telecom software provider AsiaInfo Technologies Ltd, Reuters has
reported.  urn:newsml:reuters.com:*:nL3N2GI1PY urn:newsml:reuters.com:*:nL8N2IA1V4
    The surge comes amid a prolonged recession in the financial
hub since 2019's pro-democracy protests, with the Hong Kong
economy shrinking 3.5% in the third quarter as the pandemic and
wider geopolitical tensions dimmed growth prospects in many
sectors.
    "The protracted effect on valuations from Hong Kong's social
unrest, U.S.-China trade war, National Security Law and COVID is
still there," said Samson Lo, head of Asia M&A at UBS.
    "That's made a lot of companies vulnerable," he said. "Next
year the (take-private) pipeline is even more robust."
    The Hong Kong stock market is down 6% this year, while
conglomerates and the property and construction sectors are down
30% and 13%, respectively, making them among the worst
performers.
    Nearly 60% of the take-private deals came from real estate,
industrials, consumer and retail sectors, as per Refinitiv. 
    Among those that sought to delist this year were blue-chip
stalwarts Wheelock & Co and Li & Fung, with the founder of Hong
Kong fashion retailer I.T.  0999.HK  becoming the latest to
attempt to take his company private.  urn:newsml:reuters.com:*:nL1N2IM07W

 (Reporting by Kane Wu; Editing by Sumeet Chatterjee and Kenneth
Maxwell)
 ((kane.wu@thomsonreuters.com; +85228436590; Reuters Messaging:
kane.wu.thomsonreuters.com@reuters.net))