Wednesday, September 29, 2010

Was there significant ROI for Canon’s owners?

Folio Magazine has a detailed take on UBM’s US$287 million acquisition of Canon Communications. Folio wonders if Apprise Media, one of Canon’s major owners, managed to extract a decent return on its five year investment in Canon.

In 2005, Apprise together with private equity firm Spectrum acquired Canon from another PE firm, Veronis Suhler Stevenson for US$200 million. Apprise’s Charlie McCurdy then stepped in as Canon’s CEO and he focused on growing Canon’s portfolio of events and publishing properties – largely through acquisitions. Folio’s timeline of Canon since 2005 includes eight separate acquisitions including one deal from May 2006 deal to buy eight trade shows from Reed.

McCurdy told Folio that Canon was negotiating with UBM, while simultaneously re-negotiating the terms of its debt which was scheduled to mature in May next year.

Regardless of how attractive Apprise’s ROI turned out on this deal, it is an undoubtedly positive sign to see M&A activity in the B2B media sector moving in the right direction and UBM is leading the charge as well with at least five Asia-related deals in 2010 including: Sign China in Shenzhen, the Shanghai International Children-Baby-Maternity Products Expo, UM Paper in Shanghai, Corporate360 in Hong Kong and Canon which has some Asian staff and events.

Tuesday, September 28, 2010

Ali-Yahoo Relationship Woes

Relations between Alibaba and Yahoo have been receiving attention from the media lately. There have been a few examples of sharp words tossed around including from the marketing head of Taobao who suggested that Yahoo and its CEO Carol Bartz should focus on their own flagging prospects instead of yapping on about their stake in the Alibaba Group. Separately, CEO, David Wei compared Yahoo to an ailing grandfather.

There is, however, good reason for the tension. As part of the terms of its 2005 US$1 billion investment in Alibaba, Yahoo will soon have the right to name an additional director to the board of the Alibaba Group. The Ali Group currently has a four seat board of directors: two from Ali’s management, one from Softbank and one from Yahoo (co-founder Jerry Yang).

After the 25th of October, Carol Bartz could name herself to the Alibaba Group board. Bartz is known for her aggressive, direct management style and salty language. It is fair to say she would not be a natural fit on the Ali board.

Alibaba’s senior executives have not been shy about saying: 1) they do not want Bartz; and 2) that Yahoo delivers no strategic value to them. The two companies have been on divergent paths for some time. Yahoo’s search business (which originally attracted Alibaba) has been weakening. At the same time, Alibaba has gone from strength to strength evolving into an e-commerce giant in one of the world’s fastest growing economies.

Even with the second board seat, Yahoo will not be able to gain control of Alibaba, but Yahoo could agitate for changes in its strategic direction. For example, Yahoo could use its positions on the board to push for IPO’s Ali subsidiaries such as AliPay or Taobao. That would give Yahoo an extremely attractive partial exit and return on its original investment.

The companies were reportedly in high-level discussions in the first half of 2010 as Alibaba looked to negotiate Yahoo out of the picture, but the two sides could not agree on terms.

As 25th October approaches, the Ali Group no doubt does not relish the thought of being told what to do by the “ailing grandfather” of the first dotcom boom. Complicating matters further, it is highly unlikely that the Chinese authorities would be pleased to see a foreign company such as Yahoo gain any kind of control over the largest e-commerce platform in China. That would make government approval for an IPO of Ali Group subsidiaries challenging at best.

For that reason alone, (according the FT), Ali has turned to Jerry Yang to convince Bartz not to name another director. For Ali, this is going be an irritating, distracting board room tussle that is unlikely to be resolved quickly or cleanly.

Monday, September 13, 2010

Ali Everything

Seriously, is there anything Alibaba won't jump into?

Check out this sampling from one Google Alert:

China's Internet King shares his stage with Schwarzenegger at the Hangzhou-based company's Alifest. The two discuss Alibaba's American market ambitions.

The day before eBay's John Donahoe came with hat in hand and conceded defeat in China (just about five years too late). John wonders if it is not too much trouble if Ali might consider becoming eBay's partner.

Alibaba earmarks US$3 million to help U.S. students (yes, U.S. students) to create e-commerce jobs and businesses.

Chinese auto giant, Geely is planning to sell cars in China... on Alibaba platforms.

And while they are at it, Ali seems to be tiring of the deadwood that is Yahoo. CEO, David Wei went on Bloomberg and stated rather directly: “Why do we need a financial investor with no business synergy or technology?”

Good luck getting rid of Yahoo, they are holding on for dear life hoping that Alipay, Taobao and other Alibaba Group IPOs will save them from themselves.

Tuesday, September 07, 2010

Straight from The Source

Suzanne Wang, VP of Corporate Development and Investments at Global Sources provides a response to our previous post:

"We wish to clarify that, contrary to the speculations in your article [previous blog posting], Global Sources currently has no intention of "privatising the company", nor was that the rationale for our recent tender offer (or for the previous one in 2008).

We embarked on our tender offer because, after evaluating our cash position, our Board of Directors felt that it would provide a good opportunity for our shareholders to participate in a return of investment, while also allowing us to maintain a cash balance that would continue to enable us to evaluate future acquisitions or other potential investment opportunities."

Well, that is pretty much an unequivocal answer.

Thursday, September 02, 2010

Global Sources: Closing the kimono?

It is just some idle speculation on our part, but we are wondering if Global Sources is mulling privatising the company – perhaps in the long-term. Global Sources has completed two tender offers in the past 20 months. The most recent one in July resulted in the company buying back some 11 million shares at US$9.00. In November 2008, the company purchased 6.25 million shares from investors at US$8.00 per share. That is a purchase of 17.3 million shares at a cost of US$150 million.

Depending on the source, the figures vary regarding the number of GSOL shares held by insiders and by institutions, but it seems that the NASDAQ-listed company has 44.65 million shares outstanding. Of those, 65.01% are held by insiders and another 32.6% are held by institutions. That leaves 2.39% as free float which is typically defined as the shares not held by insiders and large (usually institutional) shareholders. Depending on the source, the free float figure range from 2+% to about 7.5%. So that translates into a free float of anywhere from 1.1 million shares to about 3.4 million shares.

Companies pursue buybacks and tender offers for a variety of reasons and it does not necessarily indicate a path to privatising, but Global Sources really hasn’t benefited much from its listing and it takes a considerable amount of time and resources to remain a NASDAQ-listed company.

Ten years ago, Global Sources listed on NASDAQ through a reverse listing – raising no capital in the process. The company generally has no need to use the listing to raise capital, it has no long-term debt, trades at a lower valuation compared to its peers and has not needed to use the shares for any significant M&A activity.

As a result, it seems a fair question to ask why the company needs to be listed at all. If Merle Hinrichs ever decided to sell the company (improbable at best) he might do better to close the kimono.