Vnet Founder Gives Up Take-Private Bid as Blackstone-Backed Data Centre Firm Stays Listed

Vnet Group founder Josh Chen has withdrawn his long-standing offer to take the Chinese data centre operator private, arguing that the NASDAQ-listed firm would be better served remaining publicly traded.

Beijing-based Vnet confirmed Chen’s decision on Thursday after a Bloomberg report broke the news earlier in the day. Chen, who serves as Vnet’s co-chair and interim CEO, had made a non-binding proposal in September 2022 to acquire all the outstanding ordinary shares of the company, whose backers include private equity giant Blackstone.

“I withdrew my privatisation proposal as I believe that maintaining Vnet’s listing status is better aligned with the company’s long-term interests given current market conditions,” Chen said in a release. “I remain confident in Vnet’s growth potential and will continue to devote myself to its high-quality, sustainable development.”

A Vnet special committee set up to evaluate takeover bids has also ceased considering a separate offer made by investment manager Hina Group and the Shanghai branch of Industrial Bank in April 2022 and recommended that the board of directors dissolve the special committee, according to the announcement.

State Investor in Control

Vnet’s ownership picture appears to be stabilising after government-owned Shandong Hi-Speed Holdings Group acquired $299 million worth of new shares late last year to become the data centre firm’s largest shareholder.

At the end of February, Shandong Hi-Speed held a 41.2 percent ownership stake in Vnet, followed by US investment manager Fidelity International with 5.2 percent, according to Vnet’s annual report released in April.

Founder Chen’s stake amounted to 4.1 percent. On a voting-power basis, Shandong Hi-Speed controlled 35 percent while Chen commanded 17.3 percent.

“We are optimistic about Vnet’s future as a listed company and will continue to strengthen our cooperation for mutual success,” Shandong Hi-Speed CEO Jianbiao Zhu, who co-chairs Vnet with Chen, said in Thursday’s announcement.

Stock Struggles

Previously seen as an opportunity for global investors to profit from the growth of China’s digital infrastructure sector, Vnet received backing from some of the world’s largest investors.

Starting in 2020, Manhattan-based Blackstone invested $400 million in Vnet, including purchasing $150 million worth of shares in the company in June of that year. In February 2022, funds managed by Blackstone agreed to invest $250 million in 2027 convertible notes issued by Vnet.

Vnet’s American depositary shares traded Thursday at $2.31 each, down 14 percent this year and 88 percent since their 2011 listing. Blackstone’s five-year notes are convertible into Vnet ADSs, each representing six Class A ordinary shares, at $11 per ADS.

Vnet’s formerly NASDAQ-listed rival, Chindata, was taken private last year by its major shareholder, private equity major Bain Capital, in a $3.2 billion deal.