December 23, 2015 / 1:26 AM / 2 years ago

LPC-Qihoo 360 seeks $3.4 billion-equivalent buyout loan

HONG KONG (Reuters) - Chinese mobile security software maker Qihoo 360 Technology Co is raising a US$3.4bn-equivalent loan to back its US$9.3bn buyout by a group of investors, banking sources said on Tuesday.

Logos of Qihoo 360 are seen at an expo in Beijing, July 21, 2015. REUTERS/China Daily

Qihoo received a buyout offer from a consortium led by CEO Zhou Hongyi in June, which was the biggest of a slew of ‘take private’ buyout offers announced earlier this year while Chinese stocks were soaring.

Qihoo’s loan has been fully underwritten by sole mandated lead arranger and bookrunner China Merchants Bank, which has invited two other Chinese banks to join the deal, the sources said.

The new loan brings the total volume of loans raised by US-listed Chinese companies to back privatizations to at least US$7.45bn in 2015, according to Thomson Reuters LPC data.

The renminbi-denominated loan is being raised in China, as the sponsors are mainland Chinese companies which primarily generate revenues in renminbi, the sources said. The borrowing entity will be an onshore company.

The acquisition loan will not be launched into general syndication and is expected to close by the end of this year, the source said.

The deal includes a US$3bn-equivalent seven-year loan and a US$400m-equivalent bridge loan facility, according to sources and a press release on December 18.

The ratio of debt-to-Ebitda is no more than 6x, one source said.

OFFER DETAILS

Qihoo agreed to be acquired by a group of investors for about US$9.3bn on December 18, including about US$1.6bn of debt. The remaining US$5.9bn will be funded by the consortium, according to the sources.

Holders of each American Depositary Share (ADS) - two of which represent three class A ordinary shares - will get US$77 in cash, while owners of class A and class B ordinary shares will receive US$51.33 in cash per share, the company said last Friday.

Qihoo said last Friday that entities controlled by Zhou, who is also Qihoo’s co-founder, and Chairman Xiangdong Qi had agreed to vote all their shares in favour of the deal. Their combined stake represents about 61% of the voting rights attached to the outstanding shares.

The consortium taking the company private includes Citic Guoan, Golden Brick Silk Road Capital, Sequoia Capital China, Taikang Life Insurance, Ping An Insurance, Sunshine Insurance, New China Capital, Huatai Ruilian, Huasheng Capital or their affiliated entities.

Many of the loans provided this year to back the privatizations of Chinese companies have been provided by Chinese banks and have not been syndicated.

Medical devices manufacturer Mindray Medical International mandated Bank of China Macau and Ping An Bank in November to arrange a US$2.05bn term loan to support its US$3.3bn management buyout.

Ping An Bank and Shanghai Pudong Development Bank also underwrote a US$1.1bn loan in August that backed the US$3.3bn privatisation of New York-listed WuXi PharmaTech (Cayman) Inc.

Industrial Bank is also expected to arrange a debt financing to support Trina Solar Ltd’s proposed buyout and said that it is highly confident in its ability to underwrite the financing, according to press release on December 14.

 

Editing by Tessa Walsh

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