Spin-out of PE-backed SouFun set for China reverse merger
SouFun Holdings, a US-listed Chinese online real estate portal backed by the Carlyle Group and IDG Capital Partners, plans to spin out its online media and finance service units into a domestic backdoor listing.
Two months ago, SouFun unveiled plans to acquire a controlling stake in Shanghai-listed shell Chongqing Wanli New Energy through an asset swap. According to the latest statement, Wanli will exit its existing assets and buy SouFun's three subsidiaries, which cover online media, internet finance and big data. It will issue RMB16.18 billion ($2.46 billion) in shares, giving SouFun a 70% stake in Wanli.
In addition, Wanli is issuing up to RMB3.16 billion worth of shares through a private placement. IDG, Carlyle, Baidu, and several onshore investors, including Xizang Ruidong Wealth & Investment Management, have agreed to subscribe to the placement. The proceeds will be used for future business growth upon completion of the backdoor listing. Investors will be subject to a 36-month lock-up period.
SouFun, which operates the Fang.com portal, was founded in 1999. It provides marketing, e-commerce, listing, finance and other value-added services for the real estate and home-related sectors. It currently has about 100 offices nationwide and covers more than 370 cities.
The company was acquired by Australia's Telstra International Holdings in 2006. Telstra later sold its entire stake through SouFun's 2010 IPO, which raised $124 million. Apax Partners and General Atlantic each took a 19% stake for $163 million at that time.
Last September, IDG and Carlyle said they would invest between $400 million and $700 million in SouFun, alongside company management. This followed a commitment of up to $1 billion from the same investors last August.
SouFun reported revenue of $702.9 million in 2014, up from $637.4 million the previous year. Net income dropped from $298.7 million to $253.2 million over the same period, largely due to rising marketing expenditure.
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