Ocean Link seeks $7b privatization of China's 58.com

The GP has offered to acquire all outstanding shares for $55 apiece, which represents a 17.8% premium to the April 1 closing price. It said the offer is an attractive opportunity for shareholders, "especially during a time of persisting operating difficulty and ongoing COVID-19 uncertainty," according to a filing. Tencent Holdings is the largest external shareholder with a 22.6% stake.

In mid-January, 58.com's stock was trading above $69 – an eight-month high – giving the business a market capitalization of $8.7 billion. Over the ensuing eight weeks, it plunged to $43.26, its lowest level since mid-2017. It spiked 13% on April 2 in response to Ocean Link's offer, closing at $52.76.

Announcing its fourth-quarter financial results in early March, 58.com warned that it had been "significantly impacted by the outbreak of COVID-19." It projected that first-quarter revenue would be RMB2.16-2.26 billion ($305-319 million), down from RMB3 billion in the same period of 2019 and RMB4.15 billion in the final three months of 2019.

Speaking on the quarterly earnings call, CEO Michael Yao said that "almost all of our customer businesses have literally been on hold for a month," but he predicted the rebound would be relatively swift. Yao added that there may also be M&A opportunities because most of 58.com's competitors rely on external financing, which might be difficult to obtain.

58.com operates China's largest online classifieds marketplace, based on monthly unique visitors across its website and mobile apps. The company, which listed in 2013, covers categories such as real estate, jobs, automotive, second-hand goods, and local and business services. The 58.com portfolio comprises 58 business lines, some developed through M&A and others organically.

58.com bought a substantial stake in competitor Ganji in 2015 and fully acquired the company in 2017, while real estate listing platform Anjuke was purchased in 2015. Online-to-offline local services player 58 Home, C2C used car trading platform Chehaoduo – formerly known as Guazi – and second-hand goods marketplace Zhuan Zhuan were all established in-house and then spun out as stand-alone entities. They have since raised third-party funding.

The company had more than 500 million users across its mobile apps in 2018 as well as 3.3 million paying user accounts. Most of the paid accounts are held by businesses and 58.com has sought to develop this side of its operation through a range of specialist apps aimed at recruiters, real estate agents, car dealers, and general business services providers. Paid users either buy entry-level online marketing packages or more comprehensive subscription-based membership services.

Revenue came to RMB13.1 billion in 2018, up from RMB10 billion the previous year. Membership services and online marketing accounted for 33% and 63%, respectively. Over the same period, net profit rose from RMB1.79 billion to RMB2.39 billion.

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• Topics
• Greater China
• Buyouts
• Technology
• Consumer
• China
• Ocean Link
• TMT