Goldin Properties Holdings is a Hong Kong listed property developer that focuses on the high-end property market in China. The CEO, who owns 64.4% of the outstanding shares, is trying to take the company private and is offering HK$9.00/share. With the shares currently trading at HK$8.28 there is a decent spread of 8.7% left that implies that the market is skeptical about this deal going through, although the CEO has financing in place and is offering a fair premium.

The privatization is being done using a tender offer that opened yesterday, and will close the 10th of May (unless extended). One risk factor is that not enough people will tender their shares since 90% of the minority shareholder need to tender their to make the offer unconditional. Since there are always people who are too lazy to tender, not aware that they can tender their shares or have their shares with a broker that frustrates the process this poses a small risk. It also doesn’t help though that the company doesn’t have large institutional owners. So there might be many small retail shareholders who might not tender for one reason or another. But usually enough people will tender in a case like this, and it helps that Goldin Properties has a US$3.8 billion market cap, so it’s a deal that will get some media attention.

The biggest reason for the spread is probably that this is a stock with a bit of history. It managed to make some headlines in 2015, first after climbing in almost a straight line from less than HK$5/share to almost HK$30/share in almost two months, and then giving most of the gains away in just one day. Certainly weird, but as far as I can tell not because of nefarious actions from the company itself. Just some unhealthy speculation from investors in Hong Kong:

So I guess this merger is a little bit more hairy than most the Chinese mergers I’m involved in, but I don’t see any big risks here and with a spread of 8.7% I think it’s worth a gamble.

Disclosure

Author is long Goldin Properties Holdings