Baidu withdraws the iQiyi privatization offer or because no one is willing to take over
On the evening of July 25, Li Yanhong and Aiqiyi CEO Gong Yu sent a letter to the Baidu Board of Directors on behalf of the buyer consortium, announcing the privatization of the iQiyi. The five-month idling privatization plan was so dead. In the letter, Baidu explained this: “After many rounds of negotiations between the buyer consortium and the special committee composed of three independent directors, the buyer consortium decided to withdraw the offer and terminate the acquisition of all 80.5 held by Baidu due to the failure to reach an agreement on the transaction structure and purchase price. % Iqiyi shares plan." In fact, five months since the privatization of iQiyi, iQiyi has experienced a lot of competition with Youku, which is also privatized during the same period. Now the results are quite different. Let us first look at what happened to iQiyi in the past few months. On November 6, 2015, Alibaba announced the privatization of Youku Tudou for the purchase of the remaining shares of Youku Tudou for US$4.77 billion (at this time, there is US$1 billion in premium books). On February 12, 2016, Li Yanhong and Aiqiyi CEO Gong Yu proposed to privatize iQiyi by MBO (Management Acquisition) to acquire the 80.5% stake in iQiyi held by Baidu and to Aiqi. The art valuation is 2.8 billion US dollars. On April 6, 2016, Youku Tudou was privatized and became a wholly-owned subsidiary of Alibaba. It launched a domestic listing plan within three years. On May 24th, 2016, the iQiyi MBO project plan was exposed. The plan showed that iQiyi plans to use the A-share listing in 2017. By the end of 2020, investors will realize the 3.3x income through the A-share exit. The rate will reach 27%, when the market value of listed companies will reach 110 billion yuan. On July 19, 2016, Baidu shareholder Acacia Partners issued an open letter against the privatization of iQiyi and made five suggestions. On July 25, 2016, Baidu announced the abandonment of iQiyi MBO, and the iQiyi privatization plan was terminated. Initially, iQiyi decided to privatize mainly based on three considerations: to improve the financing ability of iQiyi in the domestic capital market; to optimize Baidu's book; one of the aircraft carrier plans to increase the ideological competitiveness of iQiyi. Like the Youku Tudou, iQiyi intends to complete the two standard actions of “privatization – listing on the domestic capital marketâ€. But on this road, there are two major difficulties: the business loss is serious, and the only listed route “strategic emerging board†is expected to be deleted. Aiqiyi has always been in a state of serious losses. In 2013, 2014 and 2015, the losses were 743 million yuan, 1.11 billion yuan and 2.38 billion yuan respectively. However, according to insiders of Baidu, Baidu’s operating profit margin in the third quarter was lowered by 5.4% in order to “transfusion†to iQiyi. This kind of loss is not conducive to the search for big investors when Iqiyi is privatized, and the second is not conducive to the subsequent listing. On the other hand, in March this year, the “13th Five-Year Plan†draft revision revised the “Strategic Industry Emerging Boardâ€, but in May, according to the “Wall Street Journalâ€, the Shanghai Stock Exchange may launch “Strategic Emerging Boardâ€. ", to undertake companies that have delisted from the stock market but are not qualified for IPO. The uncertainty of the "strategic emerging board" has made the listing action after privatization variable, but this is only the trouble of Youku Tudou. As mentioned above, there are many difficulties. Therefore, at the beginning of the announcement of privatization, iQiyi gave a relatively low price (about 60% of the market value of the city) to attract investors. In May of this year, the iQiyi MBO project plan was exposed. Iqiyi said that the project book was not officially authorized, but it did not directly deny the authenticity of its content. In the plan, iQiyi promised to “listen A shares in 2017. By the end of 2020, investors will accumulate 3.3x income through A shares, and the internal rate of return will reach 27%†(this means that if Iqi If the company is listed successfully in 2017, the investor's assets will be locked for 3 years, and in 2020, the investors will be cashed out. The uncertainty of listing is destined that iQiyi can best attract a large capital party as its investor. Such investors will not pursue the iQiyi debt regardless of the listing and profit or loss of iQiyi. It is focused on the layout. So at the time we thought that the best investor of iQiyi was Wanda - not lacking money, it needed an online entrance. However, such a large shareholder did not extend an olive branch to Aiqiyi. On July 19th, Baidu shareholder Acacia Partners issued an open letter accusing Yiqiyi of being undervalued. He believed that the privatization of Aiqiyi harmed the long-term interests of Baidu shareholders and made five suggestions to Baidu. But this is not the reason why Baidu terminated the privatization of iQiyi at this time, because Baidu privatization of iQiyi must be well thought out, Acacia Partners has few shares and the proposal is unreasonable, Baidu is impossible to adopt. The privatization of iQiyi was paralyzed and eventually failed. Overall, the main reason for the failure of Iqiyi’s privatization was that it did not find a suitable investor. Baidu could only reluctantly take the money-laden baby home. Want to be trendy and just blindly follow popular logo? 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