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PEdaily E-Magazine Issue No.540 Summary

Core Content

This issue of PEdaily E-Magazine, published on July 6, 2012, provides a comprehensive overview of the Chinese private equity (PE) and venture capital (VC) market during the first half of 2012. It includes exclusive reports, hot news updates, and analysis of the changing market landscape.

Main Points and Key Information

1. M&A Market Trends

• In H1'12, the Chinese M&A market experienced a cooling down.
• Total M&A deals: 422
• Total transaction value: US$28.65 billion
• Decline compared to H1'11:
  • Number of deals: 21.3%
  • Transaction value: 22.03%
• Deal breakdown:
  • Domestic deals: 336, with US$7.07 billion involved
  • Chinese companies acquiring abroad: 60, with US$19.42 billion involved
  • Foreign companies acquiring Chinese firms: 26, with US$2.16 billion involved

2. Hot News Highlights

• Home Inns Acquires E Home Inn:
  • Acquired 13 chain hotels in Anhui for US$9.4 million.
  • The acquisition is expected to enhance Home Inns' brand influence in the region.
  • The average remaining lease term of the hotels is eight years.
• Carlyle Buyout Fund Invests in Crystal Orange Hotel:
  • Invested in the high-end brand "Crystal Orange Hotel" with a tens of millions of US dollars.
  • Orange Hotel has expanded significantly since its entry into China in 2006.
• Sohu Repurchases Shares Held by Alibaba:
  • Sohu repurchased 10.88% of Sogou's shares previously held by Alibaba for US$25.8 million.
  • The repurchase signals Sogou's upcoming IPO.
• CapitaMalls Asia Launches a US$1B PE Fund:
  • Launched the largest fund to date, with US$1 billion total size.
  • Fund will be used to invest in shopping centers being developed by CapitaMalls Asia.
• Himin Solar's IPO Suspended:
  • Himin Solar's IPO application was terminated due to operational and management issues.
  • The failure is attributed to industry overcapacity, European debt crisis, and trade investigations.
• Xiao Nan Guo Listed on HKEx:
  • Xiao Nan Guo Restaurants Holdings Ltd. listed on HKEx on July 4, 2012.
  • Raised HK$500 million through the IPO.
  • Funds will be used for expanding restaurant chains, debt repayment, and IT system upgrades.
• Aiyingshi Applies for IPO:
  • Shanghai Aiyingshi Business Services Co., Ltd. plans to list on the Shenzhen Stock Exchange.
  • Provides maternity and infant products and services through B2C online shops and physical stores.
• 360buy.com Shifts to PE Financing:
  • 360buy.com may abandon IPO and seek PE financing due to lower-than-expected IPO valuation.
  • The valuation is around US$6 billion, below the US$10 billion expected by VCs.
  • Old shareholders like DST, Gaoling Capital, and Tiger Fund may exit.
  • New investors include BlackStone, Temasek Holdings, and CITICPE.

3. Market Landscape Analysis

• The VC/PE windfall era is ending, and the industry is facing regulatory tightening and increased competition.
• IPOs are volatile, with many companies stumbling due to market conditions.
• Exits are becoming more challenging, with a mire-like environment.
• Real estate funds are performing better than other sectors.
• The market is reshaping, and investors are preparing for the new climate.

Conclusion

This issue of PEdaily E-Magazine highlights the declining trend in the Chinese M&A market and the changing dynamics in the PE/VC industry. It showcases key developments such as major acquisitions, investor movements, and IPO suspensions, reflecting the challenges and opportunities in the sector. The analysis suggests that the industry is undergoing a shakeout, and investors must adapt to the new market conditions.