SCHEDULE 13D: Bo Yu Limited Proposes Going-Private Acquisition of OneConnect Financial Technology at Significant Premium

Bo Yu Limited, an affiliate of Ping An Insurance, has submitted a preliminary non-binding proposal to acquire all outstanding shares of OneConnect Financial Technology Co., Ltd. not already owned by Bo Yu for HK$2.068 per share, representing a substantial premium over recent trading prices.

Summary

• Bo Yu Limited, an affiliate of Ping An Insurance (Group) Company of China, Ltd., has submitted a preliminary non-binding proposal to acquire all outstanding shares of OneConnect Financial Technology Co., Ltd. not already owned by Bo Yu.
• The proposed acquisition price is HK$2.068 in cash per Ordinary Share, equivalent to approximately US$7.98 per American Depositary Share (ADS), with each ADS representing thirty (30) ordinary shares.
• This offer represents a 72.33% premium over the closing price on The Stock Exchange of Hong Kong Limited (HKSE) as of February 27, 2025.
• It also represents a 100% premium over the average closing price of the Company's shares quoted on the HKSE during the last 15 trading days prior to and including February 27, 2025.
• Furthermore, it represents a 131.66% premium over the average closing price of the Company's shares quoted on the HKSE during the last 30 trading days prior to and including February 27, 2025.
• The transaction is intended to be implemented through a Cayman Islands court-sanctioned scheme of arrangement.
• Such a scheme of arrangement will require approval by at least 75% of disinterested shareholders at a general meeting of the Issuer, with no more than 10% of all disinterested shareholders voting against it.
• Bo Yu does not anticipate revising the Cancellation Price and will confirm its intention not to increase the offer price should the proposal progress to a firm offer under the Hong Kong Takeovers Code.
• The proposal is preliminary and non-binding, and there is no certainty that it will ultimately lead to a firm offer or any transaction.
• Bo Yu Limited and Ping An Insurance (Group) Company of China, Ltd. jointly filed this Schedule 13D in connection with the Indicative Proposal.
• As of March 3, 2025, Bo Yu Limited beneficially owns 541,138,998 Ordinary Shares, representing 46.3% of the class.
• As of March 3, 2025, Ping An Insurance (Group) Company of China, Ltd. beneficially owns 563,826,366 Ordinary Shares, representing 48.2% of the class, which includes shares held by Bo Yu and China Ping An Insurance Overseas (Holding) Limited (PAOH).

Sentiment

Score: 7

Explanation: The sentiment is positive for existing shareholders due to the substantial premium offered in the going-private proposal. However, the non-binding nature and the 'no revision' clause introduce some uncertainty and limit upside potential beyond the stated offer.

Positives

• The proposed acquisition price of HK$2.068 per Ordinary Share (US$7.98 per ADS) represents a significant premium of 72.33% over the closing price on the HKSE as of February 27, 2025.
• The offer provides a 100% premium over the 15-trading day average closing price and a 131.66% premium over the 30-trading day average closing price prior to February 27, 2025, offering substantial value to shareholders.
• The Proposing Buyer, Bo Yu Limited, has stated it has sufficient financial resources readily available to fund the transaction.
• Bo Yu Limited does not expect the need to conduct due diligence on the Company, nor does it anticipate substantial regulatory obstacles, suggesting a potentially smoother transaction process.

Negatives

• The proposal is preliminary and non-binding, meaning there is no certainty that it will ultimately lead to a firm offer or any transaction.
• Bo Yu Limited explicitly states that it does not anticipate revising the proposed Cancellation Price of HK$2.068 per share (US$7.98 per ADS), limiting the potential for a higher offer from the current bidder.
• The transaction requires a high threshold of approval, specifically at least 75% of disinterested shareholders at a general meeting, with no more than 10% of all disinterested shareholders voting against it, which could be a significant hurdle.

Risks

• The Indicative Proposal is preliminary and non-binding, and there is no guarantee that it will lead to a firm offer or the completion of any transaction.
• The proposed scheme of arrangement requires approval by at least 75% of disinterested shareholders at a general meeting, with no more than 10% of all disinterested shareholders voting against it, posing a risk to deal completion.
• Bo Yu Limited has stated its intention not to increase the offer price, which means shareholders will not benefit from a potential bidding war or a higher revised offer from this party.
• Irregular trading volumes and price movements were noted in the Company's shares on February 28, 2025, prior to the proposal, which could indicate market volatility or unusual activity.

Future Outlook

Bo Yu Limited intends to acquire all outstanding shares of OneConnect Financial Technology Co., Ltd. not already owned by it through a going-private transaction, aiming to transition the company to a private, non-traded entity. The proposal is preliminary and non-binding, and there is no certainty that it will lead to a firm offer or transaction.

Management Comments

• "After carefully evaluating the recent challenges in the business and financial performance of OneConnect Financial Technology Co., Ltd., its trading price, the prospects of enabling digital transformation of its services, and the potential benefits of transitioning to a private, non-traded company, Bo Yu Limited is pleased to submit this non-binding proposal."
• "We do not anticipate revising the price stated in this Proposal, and should the Transaction progress to a firm offer under the Takeovers Code, we will confirm our intention not to increase the offer price."
• "We do not expect the need to conduct due diligence on the Company, nor do we anticipate substantial regulatory obstacles to impede the successful completion of the Transaction."
• "We have sufficient financial resources readily available to fund the Transaction."

Industry Context

This proposed going-private transaction for OneConnect Financial Technology Co., Ltd. reflects a broader trend of Chinese companies, particularly those with dual listings, considering privatization amidst challenging market conditions, regulatory scrutiny, and a desire for greater operational flexibility away from public market pressures. The rationale cited, including 'challenges in business and financial performance' and 'prospects of enabling digital transformation,' suggests a strategic move to restructure or re-focus the company outside of public market scrutiny, a common driver for such privatizations in the fintech sector.

Comparison to Industry Standards

• The proposed acquisition price of HK$2.068 per share (US$7.98 per ADS) represents a significant premium over OneConnect Financial Technology's recent trading prices, specifically 72.33% over the February 27, 2025 HKSE closing price, 100% over the 15-day average, and 131.66% over the 30-day average.
• While direct comparisons to other specific going-private transactions for fintech companies are not provided in the document, such high premiums are generally considered attractive to public shareholders, especially when a company has faced 'challenges in business and financial performance' as stated in the proposal.
• The 'no revision' clause on the offer price is a common tactic in such proposals to establish a firm ceiling, but it also means shareholders will not see a bidding war.

Management Changes

Stakeholder Impact

• Shareholders: Potential for a significant cash payout at a substantial premium if the transaction is completed. Disinterested shareholders will have the opportunity to vote on the scheme of arrangement.
• Employees: Not explicitly mentioned, but going-private transactions can sometimes lead to restructuring or changes in operational focus.
• Customers/Suppliers: Not explicitly mentioned, but a change in ownership structure could impact long-term strategic direction and relationships.

Next Steps

• The Board of Directors of OneConnect Financial Technology Co., Ltd. is urged to issue an announcement pursuant to the Code on Takeovers and Mergers of Hong Kong upon receipt of the Proposal.
• The Board is encouraged to engage with Bo Yu Limited to implement the proposal.
• If the proposal progresses to a firm offer under the Takeovers Code, Bo Yu will confirm its intention not to increase the offer price.
• The transaction, if it proceeds, will require approval by at least 75% of disinterested shareholders at a general meeting, with no more than 10% voting against it.
• A binding commitment will only arise from a firm offer made in compliance with the Takeovers Code, U.S. SEC rules, and other applicable laws and regulations.

Key Dates

Recommendation

Keywords

OneConnect Financial Technology, Bo Yu Limited, Ping An Insurance, going-private transaction, scheme of arrangement, acquisition proposal, SEC filing, Schedule 13D, financial technology, fintech, Hong Kong Stock Exchange, New York Stock Exchange, American Depositary Shares, Ordinary Shares, beneficial ownership