MBO of Digital China approved

The State-owned Asset Supervision Administration Commission (SASAC) has approved a management buy-out (MBO) of Digital China Holding Ltd<861>, a leading IT distributor in China, which might be the largest buyout in the country, reported Beijing News yesterday.

The company announced in August that its two major stake holders, Legend Holding and GA, would sell a combined 42.94% stake to four investors, including SAIF, Hony Capital Ltd, IDG VC and KIL. As the state-owned Chinese Academy of Science is a main shareholder of Legend, the buyout could only proceed with the approval from the state-owned asset watchdog.

Legend, holding a controlling stake of 47.43% of Digital China, will sell 29.6% of shares to SAIF, Hony and IDG, while GA will sell 13.34% to SAIF and KIL, a company fully owned by the president of Digital China Guo Wei. After the stake transfer, SAIF will hold 20.15% stake of Digital China, thus becoming the largest shareholder of the company, followed by Legend Holding with 17.83% stake and Guo Wei with 10.29%.

SAIF and KIL will acquire the shares at the price of HK$3.5 per share and their acquisition may involve totally HK$1.32 billion. As the stake in the purchase is more than 10% and involves a tender offer, the MBO will take 2 to 3 weeks to release, according to the regulations issued by Hong Kong Stock Exchange.