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Shares in Tom Online surged 29 per cent to HK$1.47 Monday after its parent, controlled by tycoon Li Ka-shing, confirmed a US$200m buyout offer.
Tom Group said it would offer HK$1.52 a share for the 1.03bn Tom Online shares, equal to 24.3 per cent of the company, held by minority stockholders.
The offer represents a 33.2 per cent premium over Tom Online’s previous close of HK$1.14. The company’s shares were suspended on March 2 and only resumed trading Monday.
The move is seen as a purchase of internet-related assets undervalued by the market rather than a sign of emerging regulatory clarity in China’s telecoms market.
Tom Online derives 90 per cent of its revenues from providing value-added services for mobile phone users in China. As a consequence, it saw its share price drop 60 per cent to just above HK$1 during the first half of last year, when Chinese regulators and wireless operators tightened industry regulations.
In spite of a rally late last year, the closing share price before Monday’s announcement was still 25 per cent below the company’s HK$1.50 initial offering price.
Tom Online also runs Skype China, a voice-over-internet service, through a joint venture with Skype’s parent, internet auction company Ebay.
Skype China has about 25m users and is “on a trajectory upwards”, said Ross O’Brien, managing director of Intercedent, a Hong Kong-based telecoms consultancy.
“There is no great reckoning coming in telecom, so it has got to be the success and traction of Skype China [that Tom Group is paying a premium for],” he said.
Tom Group is controlled by Mr Li’s two flagship companies, Cheung Kong Holdings and Hutchison Whampoa.
The offer will not cover shares held by Solina Chau, a close friend and business partner of Mr Li. Ms Chau controls 9.9 per cent of Tom Online and 23.8 per cent of Tom Group.
In 2003, Ms Chau sold Beijing Lei Ting Wu Ji Network, a China interactive voice services company, to Tom Group for HK$1.02bn. Beijing Lei Ting was subsequently wrapped into Tom Group’s spin-off of Tom Online. Ms Chau does not hold an executive or board position at either Tom Group or Tom Online.
Shares in Tom Group, which said it would fund the purchase through bank loans, rose 5.4 percent to 98 Hong Kong cents Monday.