PE consortium cuts 51job take-private offer by 28%

DCP Capital Partners submitted a bid of USD 79.05 per American Depository Share in September 2020, representing a 16.05% premium to the previous close. Other parties subsequently joined the consortium, including Ocean Link Capital, 51job CEO Rick Yan, and Japan’s Recruit Holdings, which is the largest shareholder on 35%. Together, they held 54.9% of the voting power. An agreement was reached in June 2021.

The revised offer of USD 57.25 per share – a 25% premium to the January 11 close – brings the valuation down from USD 5.7bn to USD 3.86bn, based on 51job’s market capitalization. What was on course to be the third-largest PE-backed take-private of a US-listed Chinese company will now be the fifth largest, assuming the deal closes.

Moreover, DCP and Ocean Link have agreed to reduce their combined post-deal stake to 9.99% “in order to mitigate potential challenges to the legality of the original transaction,” a filing stated. No details were given as to the shareholdings of other consortium members. The initial bid indicated that Yan and Recruit would roll over existing equity rather than buy additional shares.

51job’s stock reached as high as USD 79.00 in the first half of 2021, but then it took a severe hit as China introduced a string of regulatory measures targeting the technology sector. The NASDAQ Golden Dragon China Index fell by approximately 40% in the second half. Following the announcement of the revised offer, 51job climbed 9% on January 12 to close at USD 50.00.

The filing doesn’t mention the technology sector crackdown specifically, stating that a “tightening of regulatory policies across industries in the PRC … is expected to have a meaningful impact on recruitment demand and the general market environment.”

Online recruitment has not been explicitly targeted by regulators. 51job’s platforms – 51job.com, yingjiesheng.com, 51jingying.com, lagou.com, and 51mdd.com – generate most of their revenue from employers that pay to post vacancies and banner ads, and for access to candidate databases, direct communication channels, and recruitment process management tools.

51job.com primarily focuses on white-collar workers aged 20-35. It claims to be the largest recruitment platform in China, with more than 100m registered members, a database with 100m resumes, and peak traffic of 300m average daily page views. The other platforms address more specific candidate groups. Lagou, for example, focuses on the internet and technology sector.

Reduced demand arising from COVID-19 did impact revenue, with the company posting CNY 3.68bn (USD 565.3m) in 2020, down from CNY 4bn the previous year. Net income rose from CNY 532.3m to CNY 1.1bn. 51job posted year-on-year revenue increases for each of the first three quarters of 2021.

An uptick in take-privates by US-listed Chinese companies is widely expected, but so far there have been relatively few transactions involving PE sponsors. Ride-hailing platform Didi announced in December that it would delist in New York and seek to relist in Hong Kong, but it is unclear exactly how this will be achieved.

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• Topics
• Greater China
• Buyouts
• Regulation
• Technology
• North America
• China
• TMT
• USA
• DCP Capital Partners
• Ocean Link