(Yicai Global) Jan. 13 -- Leo Chen, chairman of Chinese online beauty product platform Jumei International Holding, has tendered a preliminary non-binding-offer to acquire the company for USD20 per American depositary share, which is 10 percent of the stock's 2015 initial public offering issue price.
Jumei announced on Dec. 31 that one ADS will equal 10 Class A common shares, whereas the previous ratio was one-to-one. Its current proposed offer price is USD20 per ADS, which is equal to the former USD2 per Class A common share, whereas the firm's IPO was priced at USD22 per Class A share. The firm's market value has also fallen to USD2.07 billion from USD3.4 billion on its debut. Its market cap at one point topped USD5 billion.
The company's shares [NYSE:JMEI] fell 1.07 percent to USD17.43 on Jan. 10, so the offer price is still an about 15 percent premium on current market price.
This is not the first privatization bid for Jumei. Founders Chen and Dai Yusen had filed for privatization along with Sequoia Capital in February 2016, preparing to take back the company at USD7 per ADS. At that time, its share price was hovering at USD6 per share. Faced with a further falling stock price, Chen withdrew the privatization offer in November 2017.
The announcement did not relate the reasons underlying the choice to go private, but Chen cited three grounds in the company's internal letter in 2016: Jumei's stock price is undervalued, privatization will enable the company to make longer-term decisions during the transition period, and privatization means that the company will re-embark upon entrepreneurship again.
Jumei achieved operating revenue of CNY4.288 billion in 2018 in an annual 26.3 percent drop. Sales revenue from 2016 to 2018 was CNY6.17 billion, CNY5.63 billion and CNY3.36 billion, respectively. The company also announced on Jan. 1 that it will defer the release of its semi-annual report for last year.
Chen owned and controlled 88.3 percent of the company's voting power as of March 31, the company's annual report for 2018 shows. Jumei will delist from the New York Stock Exchange once the acquisition goes through.
Jumei bills itself as a "fashion and lifestyle solutions provider with a diversified portfolio of products on offer in China" that "sells branded beauty, baby, children and maternity products, light luxury products, as well as health supplements."
Depositary receipts are negotiable securities issued by a depository bank abroad. DRs trade on the bank's domestic market, representing a specified number of shares investment in a local company's stock and trade in that country just as any other shares do. A depository bank is one that facilitates investment in securities.
Editor: Ben Armour