Tencent to Acquire Bitauto in $1.1 Billion Deal

BITA stock soared 9% on news that the Chinese tech giant is taking it under its wing.
Belinda ZhouJun 13,2020,06:55

Shares in Bitauto Holding Ltd.'s (NYSE: BITA) jumped over 9% Friday morning on news that the company is going private with an investor consortium led by Tencent Holdings Ltd. (HKEX: 0700).

The Beijing-based automotive information company said on Friday that its revenues in the first quarter reached $245.5 million, down 36% year-over-year. Its net loss hit $180.6 million, or $1.28 per American depositary share, in the three months through March, compared to net income of $13.1 million, or 27 cents per ADS, in the same period one year earlier. 

“The COVID-19 outbreak and subsequent nationwide lockdown contributed to a significant year-over-year decline in new passenger vehicle sales for the first quarter of 2020, adversely impacting our advertising and transaction businesses,” Andy Zhang, the chief executive officer of Bitauto, said in the statement.

China's auto market was flailing nationally, with monthly sales sliding 19%, 79%, and 43% in January, February, and March, according to China Association of Automobile Manufacturers.

The company also reported that its automobile finance transaction platform subsidiary, Yixin Group Limited (SEHK: 2858), saw its revenue in the first quarter reach $121.7 million, down 48% year-over-year.

The auto platform facilitated approximately 52,000 financed transactions for the three months ended March, down 65% year-over-year, with the loan facilitation amount of $550 billion.

Going forward, Bitauto is eyeing a revenue in the second quarter between $261.3 million and $275.4 million, with a 12% increase quarter-over-quarter.

The two-digit positive estimate mirrors the auto sales growth in April and May in the world's biggest vehicle market. Auto sales in China rose to 2.19 million vehicles in May, or up 15% year-over-year, which followed a growth rate of 6% in April.

Bitauto announced today that it has entered into a merger agreement with Yiche Holding Ltd. and Yiche Mergersub Ltd., a wholly-owned subsidiary of the former one.

The buyer group will fund the transaction with all-cash, which weighs $1.1 billion. Morespark Ltd., an affiliate of Tencent and Hammer Capital Opportunities Fund L.P. are the buyers.

The parties have proposed to acquire its outstanding shares at $16 per ADS, which represents a 12% premium to the closing price of $14.33 per ADS on Thursday. Bitauto announced the "going-private" proposal as early as September 2019 with a premium of 16% to the closing price of the ADSs on September 1. 

The merger is currently expected to close in the second half of 2020, according to the company's statement on Friday.

Shares in Bitauto were trading at $15.65 per share, up 9.14% midday Friday.