When I initiated the position in 51Jobs (see previous post here), I expect the deal would likely close within 3-6 months. And now 8 months have passed by and the deal is still work-in-progress. So much for my forecasting skill!
But I did get something right when I wrote that:
My guess is that mgmt team will join them in the privatisation deal at some point and hence they only have to buy 50% of the shares outstanding.
That finally happened on 4th May 2021. 51Job announced that the CEO, who owns 17.6% of the shares outstanding, would join the buyer consortium together with another PE fund – Ocean Link. Let just say that Ocean Link as a PE fund is not new to this privatization game.
https://ir.51job.com/ir/php/2021/PreRelease20210504.php?0504
Currently, there is still a 9% spread available based on the current share price. I think the risk-reward is extremely good from here since the management participation in the deal increased the probability of success significantly.
If I have to make a guess here, the buyer group needs to convince Recruit Holding to either join the buyer consortium or sell out. Once the buyer consortium can reach some kind of agreement with Recruit, then the deal is a done deal. See this Nikkei Asia article here.
While these privatization deals generate small profits in the bigger scheme of things, I enjoy the analytical process of guessing the probability of success.
This deal is now complete. https://ir.51job.com/ir/php/2021/PreRelease20210621.php?0621
As discussed above, Recruit joined the buyer consortium.
This investment’s IRR is not as high as I expected due to longer than expected closure time. But 15% IRR is not bad.