EXCLUSIVE JOYY’s prime shareholders plan take-private deal, worth agency at as much as $Eight bln -sources

Xiaomi founder and CEO Lei Jun attends an introductory ceremony of the new flagship phone Xiaomi Mi 9 in Beijing, China on February 20, 2019. REUTERS / Jason Lee

• JOYY chairman, Xiaomi founder plans to use JOYY private sources
• JOYY’s two largest shareholders plan to $ 75-100 / share supply sources
• The aim is to finalize the deal by the end of 2021 – Sources
• Then try to outsource JOYY’s main asset Bigo, list in HK source

HONG KONG, Aug 26 (Reuters) – JOYY Inc (YY.O )’s two largest shareholders, Chairman David Li and Xiaomi (1810.HK) founder Lei Jun, plan to privately acquire the Nasdaq-listed company lead amounts to up to $ 8 billion, said three people with knowledge of the matter.

They are teaming up for the deal believing the Chinese social media company is undervalued in the US market, people added. JOYY had an average market value of $ 3.9 billion last month, while its net asset value as of June 30 was $ 5.6 billion based on quarterly results.

Li and Lei plan to offer $ 75-100 per share to make the cash-rich JOYY private, two of the people said, a 50-100% premium on the stock’s average price last month.

The sources all spoke on condition of anonymity as the information was private.

Li and Lei did not immediately respond to requests for comments about JOYY and Xiaomi, respectively. Neither do JOYY.

The JOYY share rose by 8.6% in pre-market trading on Thursday.

Li and Lei owned 23.2% and 7.8% of JOYY, respectively, according to the company’s 2020 annual report. Li had 76% voting rights.

When the deal is complete, the deal will add a growing number of New York-listed Chinese companies that have already deregistered from US stock exchanges by going private or returning via secondary listings in the equity markets of their homes.

These steps come amid tighter controls and more stringent auditing requirements for US-listed Chinese companies by US regulators amid political tensions between countries.

Reuters reported last month that Weibo chairman Charles Chao and a government investor were in talks to take Weibo private in a deal that could value the Nasdaq-listed Chinese equivalent of Twitter at more than $ 20 billion. Continue reading

According to Dealogic data, there were 16 take-private deals announced by US-listed Chinese companies valued at $ 19 billion last year, up from just five such deals valued at $ 8 billion in 2019.

FINANCIAL AND REGULATORY NOD

The Li Lei Consortium is in talks with banks to fund the deal and is seeking to secure a loan by taking JOYY’s $ 4.9 billion in cash and cash equivalents.

The plan is to outsource JOYY’s key asset, Singapore-based Bigo, which operates a live streaming platform Bigo Live and the Likee short video business, and list it in Asia, likely Hong Kong, to benefit from higher valuations Source added.

JOYY was founded in 2005 and went public on the Nasdaq in 2012. It also operates the game-oriented social media platform Hago and owns a 16 percent stake in the Chinese video game streaming site Huya (HUYA.N).

JOYY announced in November that it would sell its video-based live streaming business in China to search engine giant Baidu Inc (9888.HK) for approximately $ 3.6 billion in cash.

The sale is waiting to get the go-ahead from the State Administration for Market Regulation (SAMR) antitrust regulator for final closing in the coming weeks, the sources said.

SAMR’s nod would also allow JOYY to receive the remaining approximately $ 1.6 billion in revenue from Baidu, they added.

The SAMR did not immediately respond to a Reuters request for comment.

JOYY stock is down 53% over the past six months, while the Nasdaq Golden Dragon China Index (.HXC), which tracks publicly traded Chinese companies, is down 41%.

Reporting by Julie Zhu; Editing by Sumeet Chatterjee and Himani Sarkar

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