IDG-Accel China in take-private bid for US-listed Memsic
IDG-Accel China has submitted a takeover bid for NASDAQ-listed Memsic that values the semiconductor manufacturer at $96.8 million. The prospective investor would like to work with Yang Zhao, Memsic’s founder and CEO, to formulate a definitive proposal that would likely see company management roll their shares into the acquisition vehicle.
According to a regulatory filing, IDG-Accel China Growth Fund II, a $750 million vehicle that closed in 2011, has offered to pay $4 per share in cash for all outstanding shares in Memsic. This represents a premium of approximately 130% to the November 9 closing price and a 143% premium to the volume-weighted average price over the last 60 trading days.
IDG and its affiliates currently own about 19.5% of Memsic and Quan Zhou, managing partner at IDG, sits on the company's board. Zhou will not participate in board discussions on the transaction.
The investors plan to finance the acquisition through equity capital in the form of cash and rollover equity in the target company.
Zhao set up Memsic in 1999, having previously worked at Analog Devices. The company specializes in combining MEMS sensors with CMOS-based integrated circuitry (IC) technology - hence the name Memsic. The solid-state sensors respond to external stimuli and the resulting electrical signals are carried through electronic systems via IC.
Memsic's selling point is that it can produce these integrated semiconductor components in small sizes and at low cost. The company is headquartered in Massachusetts but its manufacturing plants are located in China's Jiangsu province.
Low valuations among small- to mid-cap US-listed Chinese companies, in part driven by a spate of accounting scandals in the past couple of years, have prompted chairmen and owners to consider privatizations, often with a view to re-listing on an Asian bourse. Private equity investors often participate as execution partners and capital providers.
Prior to the Memsic offer - which is unusual in that at present it isn't a management buyout - 45 transactions have been announced since 2010, 16 of them involving private equity. However, an announcement is no guarantee of a closure: only four of these PE-backed deals have been completed as of October, data from AVCJ Research and Roth Capital Partners show.
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