The buyout offer for Chinese online dating giant Jiayuan severely undervalues the company, according to a US investment firm.
Last month, Jiayuan’s biggest shareholder Vast Profit put forward a plan to buy the remaining shares of the company, having purchased 19.6% of shares from founder Haiyan (Rose) Gong.
Vast Profit proposed a going private buyout offer that would see them buy the remaining shares at a price of $5.36 per American Depositary Share, or $3.58 per ordinary share.
And Boston-based investment firm Heng Ren believe this offer “substantially undervalues” the company, and should be raised by 119%.
Heng Ren Managing Partner Peter Halesworth said: ”The offer comes with Jiayuan.com’s stock depressed near a 52-week low after a difficult 2014.
“After Jiayuan.com’s initial public offering (IPO) less than four years ago at $11.00 per share, Vast Profit, an entity that announced it had acquired 19.6% of the company, including the recently departed co-Chairman’s stake, is offering to buy the company back at $5.37 per share – a 51% discount.”
The firm believe the stock is worth $11.74 per share, rather than $5.37.
They also said if Vast Profit then brought Jiayuan to IPO in China, its valuation would be much higher.
Heng Ren said: “Vast Profit’s proposal appears to be a very opportunistic offer that is disadvantageous to shareholders. For patient shareholders, the offer of a 15.7% premium near a 52-week bottom, after the stock has more than halved from its IPO price, seems wrong.”
Heng Ren also stated that Jiayuan.com has doubled its user base since its 2011 IPO on Nasdaq, paid shareholders dividends, has no debt, and holds $70.3m in cash — 41% of its stock market capitalisation of $173m.
In a letter to the Special Committee – created by Jiayuan’s Board of Directors to review and evaluate Vast Profit’s offer – Heng Ren said: “We understand the consideration to buy out Jiayuan.com’s shareholders to end its period as a public company in the U.S. What is unreasonable is the price offered.”
The Special Committed is using Barclays Bank as their financial advisor, and Davis Polk & Wardwell as its legal counsel, in considering the Vast Profit proposal.
You can read the full letter, sent to Jiayuan’s Special Committee, here.