The arbitrage of the eFuture Holding transaction should reward investors jumping on while the current spread exists
As promised last week, I’m back at the trading station with a deal for arbitrage-hungry fellow readers to invest in. Without any more teasing, here is the latest opportunity I’ve just put money into.
eFuture Holding (NASDAQ: EFUT): with this transaction, I’m going back to my bread and butter of low-liquidity US listed Chinese going private deals. I keep looking, but I still have to find opportunities that present better risk reward profiles anywhere in the market.
eFuture Holding is a software company with a market cap. of ~US$32mm that listed on the NASDAQ in 2006. In November 2015, an investment company incorporated in Beijing snapped up just over half of the outstanding shares in open market purchases. After a few months spent contemplating his next move, Mr. Li (President and Chairman of the investment corp.) decided to go ahead and entertain a going-private deal discussion with the Board of eFuture.
The definitive agreement has been signed on September 23, 2016 and it’s essentially telling us that there is virtually no risk that the deal doesn’t close. Financing condition? None. Regulatory approval? None. And while there is a shareholder vote requiring 2/3 of the shares present and voting at the shareholder meeting, Mr. Li owns ~52% of all the shares outstanding. Another 17% are owned by the directors of eFuture, who all gave the green light to the transaction and are voting their shares in support of it. Those figures add up to 69%, above the 66.66% minimum required, making the vote a non-event.
The spread between the current price and the acquisition price is 4.9%, and I think that there is a good chance that the deal closes in December or earlier, almost right after the vote takes place.
And that’s all there is to know, really! I wish all transactions were as easy and attractive as this one.
Disclosure: Long eFuture.
This article expresses an opinion and the author does not receive compensation for it and has no business relationship with any company whose stock is mentioned in this article; do your own due diligence before making investment decisions.