MBK makes $1.1b take-private offer for China Auto Rental

The private equity firm is proposing to acquire all outstanding shares in Hong Kong-listed CAR for HK$4.00 apiece and cancel options worth HK$72 million, according to a filing. Should currently unvested options in CAR be exercised prior to the offer closing date, the size of the overall deal will increase to HK$8.99 billion. 

CAR’s stock was up 10% at HK$3.73 as of mid-morning trading in Hong Kong on November 16. It posted a 2.7% gain on November 11 – to close at HK$3.32 – after it was announced that MBK would pay HK$1.8 billion for a 20.9% stake. That investment took out a position held by Ucar, a chauffeured car service provider established by Zhengyao Lu, who also founded CAR.

Ucar made two earlier attempts to sell shares in CAR. In April, Warburg Pincus – an existing investor – agreed to acquire a 17.11% stake across two tranches. Only the first of these was completed. Subsequently, a deal was struck with Chinese carmaker BAIC Group for a 20.9% interest at HK$1.4 billion. The transaction was terminated after failing to complete before the longstop date. 

CAR’s stock price has gradually appreciated in the past six months, having plummeted to HK$1.96 in April following the exposure of fraud at Luckin Coffee, a Chinese coffee shop chain. Lu was an early backer of Luckin and served as its chairman. Luckin COO Jian Liu, who was dismissed over the fraud, previously held an executive role at CAR.

CAR positions itself as “the most recognized” automobility brand in China, with services spanning short-term rentals, long-term rentals, leasing and chauffeured car services through a collaboration with Ucar. There is a strong focus on digital services and innovation. Operations encompass a fleet of around 150,000 vehicles in more than 270 cities.

Revenue came to RMB5.6 billion ($843 million) in 2019, up from RMB5.3 billion in 2018, while adjusted EBITDA climbed from RMB3.25 billion to RMB3.46 billion. However, net profit fell 89.3% year-on-year to RMB31 million. For the first six months of 2020, revenue was RMB2.7 billion, down 26% year-on-year.

MBK’s previous exposure to the auto rentals space includes participation alongside Baring Private Equity Asia in a $937.5 million take-private of US-listed eHi Car Services, one of China’s largest operators. MBK was rumored to be in talks with BAIC about a potential take-private of CAR. However, CAR denied involvement in any such discussions. 

MBK concentrates on control investments in North Asia. It closed its fifth flagship fund at the hard cap of $6.5 billion earlier this year.

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• Topics
• Greater China
• Buyouts
• Consumer
• MBK Partners
• China
• automobiles