HRBN&FSIN BEST CHINESE BUYOUTS OF 2011
HRBN currently at 19$ - Buyout 24$
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Maxim Group said that Harbin Electric (NASAQ:HRBN) has filed all necessary SEC documents regarding its LBO and noted its advisors have conducted their own due diligence.
The firm states the company needs to resolve its litigations before closing the transaction, which it believes, will close by the end of the year also that any major gap between the share and LBO price produces a buying opportunity.
Harbin Electric has a potential upside of 35.7% based on a current price of $17.69 and an average consensus analyst price target of $24.
FSIN Currently at 7.80 - Buyout 11.50$
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No fraud has been found at FSIN.
An $11.50 MBO proposal remains on the table and is currently being evaluated by the Independent Directors while the buyers are performing due diligence under the negotiated and executed confidentiality and standstill agreements.
Current valuation is outrageous on every conceivable measure (at less than 2x EBITDA, cashflow and earnings).
FSIN has engaged established financial, legal advisors and auditors in the form of BofA Merrill Lynch, Gibson, Dunn & Crutcher LLP and KPMG.
FSIN is a multinational corporation with over 500 customers in 30+ countries, with operations in the US, UK and PRC and an operating history that spans 5+ years. FSIN also has a credit facility provided by Regions Bank - a sizeable and respected American bank with very little appetite for off-the-fairway lending. Meaning that they are likely very comfortable with their collateral.
As of March 31, 2011, FSIN reported ~$3.50/share in cash as confirmed by KPMG (likely will be higher as of 6/30), accounts receivable and inventory totaling ~$2.14/share as well as PP&E of ~$3.19/share.
The longer the shares trade at such discounts, the greater the likelihood for success of a buyout by insiders and Abax or any other strategic/financial buyer for that matter. Management is well aware of this fact and will not speak up regarding progress until a definitive agreement is reached (as is in their long term financial interest).
Short interest in the US listed Chinese sector is at all time highs due to the indiscriminate shorting of Chinese companies (which FSIN is inappropriately included in given their global operations and customer base). Over 20% of shares outstanding and 30% of float for FSIN was sold short as of June 15; the remaining shorts will cover at some point, and it should be quite a run when that occurs.
Max downside is 100% if the company magically disappears (assigning some reasonable probability range here is sensible). For those of us that don't believe in magic, let’s focus on some potential measures of upside:
Almost 100% upside associated with the $11.50 buyout offer.
Roughly 50% upside just to get back to the March 31 tangible book value (which will likely be higher at 6/30 due to cash generation).
Potentially over 100% upside based on peer valuations.
One has to appreciate that even at $11.50, the insiders and Abax view this deal as incredibly cheap and expect to generate wildly attractive returns in short order by relisting Fushi Copperweld on the Hong Kong stock exchange.
