According to the latest news on the evening of the 25th, Baidu announced that it had received a letter from the buyer's consortium represented by Li Yanhong and CEO of Iqiyi Gong Yu, and announced that it would withdraw the invitation to privatize Iqiyi made in February this year and officially stopped Privatization by management buyout (MBO).
The letter said that after the buyer’s consortium negotiated several rounds of communication with the special committee of three independent directors of Baidu, the buyer’s consortium decided to withdraw its offer and terminate the acquisition of Baidu due to failure to reach an agreement on the transaction structure and purchase price. The plan to hold all 80.5% iQiyi shares.
Iqiyi immediately responded to this by saying: "Thanks to the media and the public for the care of iQiyi, iQiyi will continue to focus on the development of its own business and provide better video entertainment services for the majority of users."
In fact, since the privatization proposal was put forward in February this year, the road to privatization of iqiyi has not been smooth.
Originally, after the completion of privatization, iQiyi could turn to the domestic market for listing, thereby obtaining domestic capital support, alleviating the financial reporting pressure of controlling party Baidu, and at the same time realizing the splitting of the VIE structure, which is one stone and two birds.
However, in March of this year, the Fourth Session of the National People's Congress revised the draft "13th Five-Year Plan" outline by deleting the content of "establishing a new board for strategic industries". The strategic emerging board accidental abortion was due to the loss of iQiyi. It is not possible to list in other sectors, which means that iQIYI cannot achieve a listing plan for at least the next five years. This has given a great blow to the privatization process that iqiyi has just launched.
In response to this unexpected turn of events, in May this year, the "IQIYI Management Buyout Project Planning Paper" was issued, showing that management headed by Li Yanhong and Gong Yu will establish a special fund of 1.5 billion yuan for a period of 4 years. , can be extended for 1 year, dedicated to iQIYI's MBO project. And plans to complete the privatization in 2017, listed on A shares backdoor.
In early July, Baidu’s major shareholder and US hedge fund Acacia Partners released an open letter to Baidu’s CEO Li Yanhong, openly opposing the privatization of iQiyi’s idol’s privatization program led by Li Yanhong and Gong Yu’s buyer’s consortium, and The valuation is too low and the acquisition proposal is contrary to the long-term benefits of Baidu and its shareholders.
In response to this, Baidu’s official response previously stated that it has established a special committee composed of independent directors to conduct the assessment. After the relevant conclusions are formed, it will be issued to investors and the public.
Now, Baidu announced the results of the Special Committee's assessment in the form of an official announcement, which was a relatively perfect account of the parties to the matter. From Baidu itself, it can be viewed as a response to Wall Street investors' attention and compliance; from the management of Li Yanhong and Gong Yu who initiated MBO, the privatization of Iqiyi is an attempt of a detailed plan. Even if it fails, there is no substantial loss on the whole; from iQIYI, the MBO plan does not affect the company's actual business development, according to a report from third-party research firm iResearch and App Annie, an online rating service provider. In terms of membership income, market share and content products, iQiyi maintained the industry first in 2016.
For more information about the privatization of iQiyi, please refer to other related articles of Lei Fengnet (search for "Lei Feng Net" public number) : "Dissatisfaction with iQiyi's privatization valuation is too low, and shareholders urged Baidu to focus on long-term interests. “IQI Yiyi’s establishment of a 1.5 billion special fund will be selected for next year’s listing of A-share backdoor listings†and “Li Yanhong Gong Yu wants to privatise Iqiyi and plans to list in Chinaâ€.