Qihoo 360 Technology signed a definitive agreement to be acquired by a consortium of investors, who will take the company private. According to the Chinese internet company, the transaction is valued at approximately $9.3 billion in cash including the redemption of around $1.6 billion of debt.
Qihoo 360 Technology said the acquisition price represents a 16.6% premium to the closing price of the company’s ADS on June 16, 2015—the last trading day before its announcement regarding its receipt of the “going-private” proposal.
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The consortium of investors includes Citic Guoan, Golden Brick Silk Road Capital, Sequoia Capital China, Taikang Life Insurance, Ping An Insurance, Sunshine Insurance, New China Capital, Huatai Ruilian, Huasheng Capital or their affiliated entities.
Qihoo 360 cancellation of shares
Under the terms of the agreement, the Class A and Class B ordinary shares of Qihoo 360 Technology will be cancelled and will no longer exist in exchanges at the time of the completion of the merger. In exchange, shareholders of Qihoo 360 Technology will receive $51.33 in cash without interest for each American Depositary Share (ADS) they own.
Every two ADSs representing three Class A ordinary shares will be cancelled in exchange for the right to receive $77in cash without interest except for certain shares (including shares represented by ADSs) owned by entities controlled by Hongyi Zhou, chairman and CEO and Xiangdong Qi, director and president of the company.
Qihoo 360 Technology will also cancel its Treasury shares and no payment or distribution will be made on it. It will also cancel the shares held by shareholders who validly exercised and not effectively withdrawn or lost their rights to dissent from the merger under Section 238 of the Companies Law of the Cayman Islands. The shareholders of the dissenting shares will have the right to receive payment of fair value.
Funding for the transaction
According to Qihoo 360 Technology, the consortium plans to fund the transaction through a combination of cash distributions from the investors, proceeds from a committed term loan facility worth as much as $3 billion and a bridge loan facility worth $400 million.
The board of directors approved the agreement. The Chinese internet company expects to close the transaction in the first half of 2016. The deal is still subject to customary closing conditions including an affirmative vote by shareholders representing, at least, two-third of the voting power of the company’s shares.