Chinese travel site Qunar is bookbuilding for a follow-on share sale that could raise around $300 million for the company.
The ADR-share sale, the company’s first since its initial public offering on Nasdaq in 2013, will consist of 8 million primary American Depository Receipts representing 24 million ordinary shares, according to a company statement. There is also a 15% greenshoe option of 1.2 million ADRs.
No price range has been set yet but the deal will be sold at a discount to the June 1 closing price of $46.01. Goldman Sachs is lead bookrunner on the deal, which will price Thursday.
Qunar will use the proceeds for potential acquisitions of other businesses, services, or technologies.
The ADR-share sale launch coincides with a $500 million investment in Qunar by US private equity firm Silver Lake and investment manager Hillhouse Capital. Silver Lake will purchase $330 million worth of convertible bonds issued by Qunar, while Hillhouse will purchase the remaining $170 million.
The convertible bond, also handled by Goldman Sachs, was negotiated in a club deal format. A number of investors reportedly expressed interest but only Silver Lake and Hillhouse received allocations. The bonds will carry an interest rate of 2% with a conversion price of $55.
Qunar's share price has climbed 206.7% since its IPO and is up 61.8% year-to-date.
Baidu, the Chinese search engine, invested $306 million in Qunar in July 2011 and held a 61.05% stake in the company before the November 2013 listing.
The concurrent ADR- and convertible bond sales come after Qunar received an unsolicited offer on May 8 from Chinese mainland travel website Ctrip.com International to acquire all of its outstanding shares. Qunar declined to pursue the deal, according to its earnings statement dated June 1. However it “remains open to engaging in further discussions with Ctrip as well as with other strategic players in our sector,” the company said.
Qunar’s revenues totaled Rmb671 million ($108 million) as of March 31, a 29% increase over the Rmb519.8 million in the fourth quarter last year. However, it reported a net loss of Rmb701.2 million in the first quarter, compared with a net loss of Rmb675.5 million in the fourth quarter. It attributed the losses to ongoing investment in product development and product sourcing to drive business growth, namely in the company’s hotel direct business.
Silver Lake
While Qunar will remain open to future acquisition talks, it’s evident that the company doesn’t need it at the moment, a source close to the deal said, noting that, mergers and acquisitions aside, they have quite an array of options for raising funds.
Getting technology specialist Silver Lake to invest in particular bodes well for the company.
Silver Lake first invested in Alibaba in 2011, several years before the company went on to raise $25 billion in the world’s largest IPO.
Back then, Alibaba was not such an easy sell. The company founded by the former English teacher Jack Ma caused controversy when it transferred ownership of online payment platform Alipay to another company controlled by Ma without the knowledge of major shareholder Yahoo.
Silver Lake typically looks to double or treble its money within two to three years, so at the time of the investment in Alibaba, it would have implied a company valuation of at least $100 billion. Four years ago, this looked far-fetched, and even triggered some debate within Silver Lake’s own investment committee.
At the time of Alibaba’s $25 billion IPO on September 18, the company had a valuation of $240 billion.
While not as large as Alibaba, Qunar’s growth prospects are positive, with the company’s rapid growth underpinned by travel bookings in China.
Mobile revenues for the first quarter totaled Rmb398.5 million, a 275.7% increase year-on-year, while flight and flight-related revenues for the first quarter totaled Rmb457.3 million, a 94.3% increase year-on-year.
Qunar means “where to go” in Mandarin.
