China: Logistics group eyes reverse $6.6m merger

China’s largest delivery company. Express, is seeking to go public via a merger with a listed rare-earths producer, in a deal that could help illuminate Beijing’s stance on the increasingly controversial practice of so-called backdoor listings.

In a filing to the Shenzhen Stock Exchange on Monday, little-known Maanshan Dingtai Rare Earth & New Materials Co. said that it was planning to merge with S.F. Express in a complex transaction that involves asset swaps and new share issuance. The combined company will have a value of $6.61 billion, according to the filing.

If it goes through, the deal will be the latest example of private Chinese companies—some very large—eschewing initial public offerings for backdoor listings, achieved by merging with already-listed enterprises. The practice is popular because it helps companies bypass China’s difficult IPO system, where government controls on the number and pricing of companies going public have led to a multiyear wait for listings and a backlog of nearly 800 companies.

Interest in shell companies and struggling firms seen as vehicles for backdoor listings intensified after Beijing signaled in March that it had postponed a long-promised revamp of IPO rules, leading to a surge in the price of such companies’ shares.

Full Content: Bloomberg

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