August 29, 2025 | Industrials | Asia | Active
On 22-Aug-25, Chinese automobile manufacturer Dongfeng Motor Group (“Dongfeng”) received a take-private offer from its parent, Chinese state-owned enterprise and SASAC-controlled Dongfeng Motor Corp (“DFM”). As part of the deal, Dongfeng will simultaneously spin off its electric vehicle business, Voyah. The transaction will involve two inter-conditional steps to occur on or about the same day: (i) the distribution of Voyah shares to Dongfeng shareholders, followed by the listing of Voyah H shares (the spin-off, “Distribution and Listing”), and (ii) cash consideration paid to Dongfeng H shareholders, excluding H shares already held by DFM, followed by the delisting of Dongfeng (the offer, “Merger”). DFM holds 4.03% of Hong Kong-listed Dongfeng H, and 69.80% of unlisted Dongfeng domestic shares. The risk arbitrage opportunity in this transaction is a moving target and will inherently introduce significant trading risks. The easy part is the cash consideration, whereby Dongfeng H shareholders will receive HKD 6.68 per share. With Dongfeng H shares currently trading at HKD 8.92, this means that the value of the pro forma Voyah could be worth in excess of HKD 2 per share. The primary publicly-available datapoint we have is from an “Estimate-Of-Value” opinion conducted by Somerley Capital on 31-Jul-25, disclosed in the M&A announcement. High level, the financial advisor assumes that the spin-off will involve distributing 2.9bn Voyah shares, representing 79.6691% of Voyah. It has calculated an exchange ratio for the spin-off, whereby Dongfeng H shareholders will receive 0.3552608 Voyah H shares for each Dongfeng H share, and domestic shareholders will receive the same ratio of Voyah domestic shares. The investment bank, based on publicly-traded comparables, provides a Voyah valuation range of HKD 3.90-4.44 per Dongfeng H shares (mid-point of HKD 4.17), thus providing a band of valuation expectations. Of note, this is translated from the pro forma value of the Voyah spin-off, whereby Voyah itself is estimated to trade at an estimated range of HKD 10.98-12.49. If investors trust this “Estimate-Of-Value” by Somerley, the assumed total consideration to Dongfeng shareholders would be ...
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