* PE-backed buyouts of Chinese firms near $5 bln in 3 months
* Consortium to pay 30.6 pct premium to clinch deal
* 7 Days had lost half its value before offer
* PE firms in 18 of 40 take-private offers since 2010-TR
By Stephen Aldred
HONG KONG, March 1 A consortium led by Carlyle
Group and company management has reached a deal to take Chinese
economy hotel chain 7 Days Group Holdings Ltd private, after
raising its bid by 9 percent to $688 million.
Chinese companies like 7 Days are delisting from U.S.
bourses in increasing numbers as regulatory scrutiny mounts and
the advantages of a U.S. listing slip away.
The consortium backing the 7 Days deal -- Carlyle
Group, Sequoia Capital, Actis and the co-chairmen of the
company Boquan He and Nanyan Zheng -- initially approached the
company last September.
They have now agreed to pay $13.80 for each 7 Days American
Depositary Share (ADS), up from $12.70 previously, a 30.6
percent premium over the Sep. 25 closing price, the last full
trading day before the original offer was announced.
7 Days, which runs limited-service hotels under the 7 Days
Inn brand across major metropolitan areas in China, had lost
half its value since 2010 before receiving the go-private offer.
Almost $5 billion of private equity-backed deals to take
China companies private have been agreed since late December,
including the $3.7 billion leveraged buyout of display
advertising firm Focus Media Holding Ltd, a target of
shortseller Muddy Waters.
Private equity firms are backers on many of the bigger
take-private deals, working with company management to take
advantage of big discounts to peers on the Hong Kong and China
Out of 40 announced deals since 2010, 18 are private equity
backed, according to data compiled by Thomson Reuters.
Funding for buyouts of Chinese companies is done through
offshore holding companies but many banks will not finance such
deals due to the risk of non-payment. Limited financing has
restricted deal sizes, and increases the amount of equity that
private equity firms must invest.
The 7 Days buyout is backed by a leveraged loan of $120
million, or around 17 percent of the deal value, from a
consortium of mainly Taiwanese banks. Typical recent leveraged
buyouts in Asia feature around 50 percent in leveraged debt.