Lei Jun, CEO offer to take China's YY private

The offer values the company at approximately $3.7 billion, based on the number of shares outstanding. Lei, a noted angel investor and founder of Chinese smart-phone brand Xiaomi, and Li have proposed to pay $68.50 per share in cash for all outstanding American Depositary Shares (ADS), according to a statement. This represents a premium of 17.4% to the July 15 closing price.

Lei and Li already own a combined of 35.7% stake in YY and have 75.1% of the voting power in the company. The take-private transaction will be financed through a combination of debt and equity capital.

As of the end of last year, GGV Capital owned a 5.6% stake, or 59.89 million common shares, in the NASDAQ-listed firm, a filing showed.

YY was set up in 2005 and launched its core product, YY Client, three years later. It acts as a social platform that allows real-time group-based engagement between users through voice, text and video. The company went public in the US in 2012, having raised capital from a group of VC investors including GGV, Steamboat Ventures, Tiger Global and Morningside Technologies.

YY generated revenues of RMB3.7 billion ($593 million) in 2014 - primarily from online music and entertaining, online games and advertising - compared to RMB1.8 billion the previous year. Net income rose from RMB478 million to RMB1.07 billion over the same period.

A string of Chinese tech companies have received proposals to be taken private from the US and seek for onshore IPOs, as entrepreneurs and investors want to leverage the perceived valuation arbitrage that can be achieved by re-listing businesses on home bourses. Foreign VCs face the prospect of having to sell off investments in restricted industries. 

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• Topics
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• Lei Jun