PE consortium submits take-private bid for China's Qihoo

The offer values the company at approximately $9.9 billion, based on the number of shares outstanding. The consortium is willing to pay $77.00 per share in cash for all outstanding American Depository Shares (ADS), according to a filing. This represents a premium of 16.6% to the June 16 closing price.

The stock closed at $70.12 on June 17, up 6.16%, its highest level since last November. However, the company is trading well short of its March 2014 peak of $120.79. As with the raft of other US-listed Chinese companies to receive take-private offers in recent weeks, investors are betting on the company achieving a stronger price-to-earnings (P/E) multiple on a domestic bourse.

Qihoo's current P/E ratio is around 41. This compares to 82 and 137 for Shenzhen's SME and Chinext boards, respectively. The New Third Board is also gaining traction.

Hongyi Zhou, Qihoo's chairman and CEO, owned a 16.2% stake in the company as of December 2014, while Sequoia had 1.5%. CITIC, China Renaissance and the final named member of the consortium, Golden Brick Capital Private Equity Fund I, do not appear in the shareholder roster.

Qihoo completed a $200 million share repurchase program in February and won board and shareholder approval to repurchase another $200 million worth of shares in March.

Founded in 2005, the company was the leading provider of PC internet security and mobile internet security products in China last year, with 479 million monthly active users and 744 million smart phone users. It was also the number one PC browser provider and Android mobile app store operator.

Qihoo generated revenues of $1.39 billion in 2014 - primarily from online advertising, value-added services and enterprise and IT systems services - compared to $671.1 million the previous year. Net income rose from $99.7 million to $222.8 million over the same period.

Sequoia was among the company's first backers in 2006. Qihoo also received capital from a host of other VC and PE investors before going public on the New York Stock Exchange in 2011.

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