Can’t afford to zhang want to retreat, retreat, he can’t take so much money!

author: I stocks Johnny

a report said yesterday, sohu is a proposal for privatisation and financing, contact including credit suisse and other investment Banks and private equity funds, on the news, sohu’s capacity surged 12% in late and swimming subsidiary. After sohu’s official statement is not considering privatisation, March 6 trading shares tumbled 11.06%, almost erased all the gains of the last trading day.

why privatization? Low valuations, child business is already listed company, or plan to split, group didn’t look too big necessary to remain in the capital market, is like grand the delisting of privatisation last year? But careful analysis of the two companies’ ownership structure and corporate status quo, sohu privatisation possibility is not high in the near future.

sohu great similarities in one: undervalued

sohu portal, below the banner, search, video game a few big business, facing the strong competitors, including companies such as baidu, sina, youku, the Matthew effect is very obvious in the Internet industry, the boss often get the premium, row behind it is hard to closer and leader.

2012, sohu group net profit of $78 million, in the previous session, the rumors of privatisation sohu closed at $43.64, market capitalization of about $1.66 billion, excluding group account balance of $834 million cash and cash equivalents (as of December 31, 2012), sohu p/e ratio is only 10.5 times.

contrast before shanda group delisting valuations, shanda’s board of directors received an offer in November 2011, a message sent in the previous session, big market value of about $1.88 billion, as of September 2011, shanda group holds $833 million in cash and cash equivalents, but because the business such as shanda literature, cool 6 loss serious, from the past 12 months only net profit of $58.9 million, excluding cash, shanda group p/e ratio is about 17.7 times.

look at another proposed last year privatization delisting star company, focus media’s board in August 2012 to receive an offer, a message sent in the previous session, the market value of about $3 billion, as of March 30, 2012, focus media hold $856.9 million in cash and cash equivalents, distance from the recent 12 months a net profit of $196 million, excluding cash, focus p/e ratio is about 10.9 times.

so, zhang thinks that sohu undervalued, and too.

sohu great similarities in two: games business for other business transfusion

sohu full-year net profit of $2012 in 78 million, changyou full-year net profit of $282.4 million, for conveying group stable cash flow. Swimming group currently holds about 68% of the company, excluding changyou contribution to profits, losses of about $114 million, sohu group main losses should be video and sogou business, and the two pieces of business is the important, to cultivate the sohu group had split listing plans in the future. And the grand delisted after a similar, the basic situation of online business for video and shanda literature at the same time, the game business such as blood transfusions group performance pressure.

loan pressure Sohu rapid privatization less likely

however, on the equity structure of it, the situation is very different.

big privatisation, “the buyer” including the chairman of the board and CEO Chen, his wife Luo flourishing (royal members of the board of directors) and its brother 2 habib gb (grand COO and members of the board of directors), as of September 30, 2011, “the buyer” held a grand with the proportion of shares issued is as high as 68.4%. And according to the SEC filing disclosed in July 2011, according to sohu zhang, chairman of the board and CEO of sohu 7.02 million shares at the time, compared with 20.2% of shares.

from this perspective, a big stake in more concentrated, the Chen family you have more leverage a privatization, and ownership structure is more dispersed, sohu zhang holdings are relatively few.
Sohu’s current market capitalization of about $1.7 billion ($834 million cash account), privatisation offer typically require premium, if carried out in accordance with the price of $2 billion privatization, zhang also need about $1.6 billion, this means that zhang to privatisation, will need a large consortium of financial support (to find the money is not too easy, larger loan under pressure, even if privatization is successful, because the repayment pressure can’t ease development video, sogou, etc.

moreover, shortly after the big privatisation finish, with 3.5 billion yuan to zhejiang news media sold non-core business winger and holdfast, guess this portion of the funds to repay loan for privatisation. And sohu’s not to like grand winger and holdfast immediately liquidated assets, sogou and video business are in focus group, and are endowed with split public expectations.

in the face of such a large loan pressure, zhang is unlikely in the near future the sohu privatisation, it is to maintain the current status of us-listed gradually each business development group, and then to find a way to split the listed more stable, if the future sogou and video business can be smoothly to spin off listing, group privatisation delisting possibility may be higher.