China: Qihoo 360 privatization bid receives shareholder approval

One of the largest Internet companies in China, Qihoo 360 Technology has received shareholder approval for its merger agreement. The transaction is still subject to “satisfaction or waiver of the conditions set forth in the Merger Agreement”.

In June, Qihoo received a buyout proposal worth $9.3 billion from a consortium of buyers headed by Qihoo’s CEO Zhou Hongyi. CEO Hongyi alone owns around 16% of the company. In December, Qihoo accepted the offer without any alterations.

The idea back then was to delist from the U.S. and dismantle the VCE structure to make it eligible for a listing in China. The Chinese government was relaxing its grip on the financial markets, making it more conducive for local players wishing to raise funds. Also, the Chinese stock market was on a huge bull run and listing in China would have fetched much higher valuations.

However, the estimated $5 trillion crash of the Chinese equity markets this summer left investors skeptical of these “go private” deals. Spreads on these non binding private offers had increased as stock prices fell. Some stocks including Qihoo had lost half their market price during the Chinese market rout. However, with the intervention of the Chinese government, markets have started to stabilize somewhat (despite a tumultuous beginning of the year) and the reopening of the IPO market last November has given a fresh boost to these deals.

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