The privatization offer is also delayed as a result of the failure to complete the above share transaction, even though the financing is supposedly already in place. This implies the buyers are using the share sale proceeds to bootstrap their offer. So the definitive offer is not so definitive after all, i.e. the offer is conditional upon the receipt of the AM Advertising share sale proceeds. I have already done the number crunching in my previous posts, without the money in the company's kitty, there is no compelling reason to take the company private then.

There is an earnout arrangement in the AM Advertising share sale, with the company providing a profit guarantee of RMB 1.06 billion for the financial years 2015 to 2018. The amount earmarked for 2015 is RMB 200 million (USD 32 million at 1 RMB = 0.16 USD). For the first 3 quarters of this year, the profits attributed to the business were USD 4.9 million, 1.3 million and 10 million respectively, making a total of $16.2 million. So to meet the profit target for 2015, it will need to earn another $15.8 million for the final quarter of this year, or almost as much as it has earned in all the previous 3 quarters. Even though management has expressed optimism in hitting the mark, I would rather keep my fingers crossed, seeing how volatile the earnings have been. One possible way of doing it is to shift some of the costs from the discontinued business to the continuing business, but how are they going to keep doing this for the next few years?

With all these uncertainties over the transactions, risk arbitraging is not for the faint hearted.