Harbin Electric management buyout receives board approval

There had been a great deal of skepticism as to whether CEO Yang Tianfu could close the deal. First, Baring Private Equity Asia pulled out of an agreement struck last year to participate in the buyout. Then, just in the last week, Harbin came under immense pressure from short-sellers. Citron Research ask questions about the credit agreement between Yang and China Development Bank and also released documents suggesting the CEO had admitted guilt in a 2004 loan fraud case. The company denied the accusations.

Harbin, which manufacturers electric motors, is one of a number of Chinese companies that listed in the US via reverse mergers. After financial inconsistencies were uncovered in filings made by several of these companies, short-sellers and hedge funds have begun to scrutinize many more, searching for weaknesses. Prior to the buyout announcement, Harbin's stock was down 64% since October 11.

In a research note published Monday, Mark Tobin, co-director of research at Roth Capital Partners, reiterated his "buy" rating on Harbin, stressing that the stock is still trading at a substantial discount to the offer price. "The current discount is the widest of any of the US-listed Chinese companies that have reached the definitive agreement stage," Tobin said.

The US-listed Chinese companies that have reached agreements on privatization deals, including management buyouts, are China Fire & Security Group, Chemspec International, China Security & Surveillance and Funtalk China Holdings.

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• Topics
• Greater China
• Buyouts
• Industrials
• Baring Private Equity Asia
• China Development Industrial Bank