Hong Kong bankers make lemonade out of delistings

Fosun Tourism

15/01/2025 12:00

(The author is a Reuters Breakingviews columnist. The opinions
expressed are her own.)
    By Katrina Hamlin
       HONG KONG, Jan 15 (Reuters Breakingviews) - Club Med
owner Fosun Tourism  1992.HK  wants to delist from the Hong Kong
stock exchange, capping a record year for privatisations in the
city. The move, outlined last month, will help its ailing
Chinese parent Fosun International  0656.HK  continue its
restructuring a decade after a global acquisition spree. Hard-up
shareholders will enjoy a decent premium. And the growing trend
for take-privates is bittersweet for bankers, too. 
    Fosun Tourism wants to buy all the stock not owned by its
controlling shareholder Fosun International. The HK$7.80
per-share offer is far below its 2019 peak of HK$17.40, but it
represents a 95% premium to the previous day’s close. Of 20
similar transactions in Hong Kong last year, only two offered
higher premiums, and investors have the option to claim shares
in the new unlisted entity.
    For Hong Kong’s dealmakers, it is a small ray of sunshine.
The value of announced transactions to take listed companies
private reached nearly $14 billion in 2024, rising from $1
billion a year earlier, per Dealogic. That was a welcome fee
earner for Deutsche Bank, Morgan Stanley, Goldman Sachs and
JPMorgan. They all had advisory roles in the largest of those
deals in a year when initial public offerings in the city raised
a measly $11 billion, according to LSEG data. It was the first
time privatisations outstripped listings since at least 2000.
    They'll be hoping for a better balance of deals in 2025.
Bankers help clients take companies private when it makes
strategic sense, but the process is often straightforward,
meaning it’s difficult to demand fees on a par with other M&A or
large IPOs, which typically yield up to 1.5% of the deal value
in Hong Kong. 
    Fosun Tourism's proposal is a reminder that the lacklustre
valuations which drove the take-private trend and discouraged
debuts remain: Deloitte forecasts close to $20 billion in Hong
Kong listings this year. But the U.S. Department of Defense's
decision last week to add $150 billion battery maker
Contemporary Amperex Technology  300750.SZ , which is planning a
secondary listing in the city, to a blacklist casts a shadow
over such estimates. Dealmakers will be trying to turn lemons
into lemonade for a little longer yet.
    Follow @KatrinaHamlin on X
     
    CONTEXT NEWS
    Hong Kong-listed Fosun Tourism has proposed to buy back its
shares that are not owned by its controlling shareholder, Fosun
International, according to an exchange filing on Dec. 10. 
    Fosun Tourism will buy back the outstanding shares at
HK$7.80 each, a 95% premium to their last close, or
alternatively minority shareholders can exchange their shares
for a stake in the new unlisted entity.
    The shares closed at HK$7.40 each on Jan. 7.

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Graphic: Hong Kong take-privates outstrip listings in 2024    https://reut.rs/407gg6z
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 (Editing by Una Galani and Ujjaini Dutta)
 ((For previous columns by the author, Reuters customers can
click on  HAMLIN/ katrina.hamlin@thomsonreuters.com; Reuters
Messaging: katrina.hamlin.thomsonreuters.com@reuters.net))