GOODBABY INTL (01086) privatization offers shareholders an opportunity to exit at a high premium.

It is understood that on September 27, GOODBABY INTL (01086) and the offeror Crystal Aurora International Ltd. jointly announced a privatization offer plan. The offeror will pay plan shareholders a cancellation price of HK$1.5 per plan share in cash, with the total consideration including the share option portion amounting to a maximum of approximately HK$1.322 billion. After the plan becomes effective, all plan shares will be cancelled and eliminated, and it is proposed to withdraw the listing status on the Stock Exchange. The offeror is wholly owned by Mr. Song Zhenghuan, the founder of the company, who serves as the company's chairman and executive director. The offeror and parties acting in concert together hold 883,300,915 shares, representing approximately 52.78% of the issued share capital. The privatization price of HK$1.5 represents a very high premium, approximately 38.89% premium over the closing price reported on the Stock Exchange on the last trading day before the announcement, a 53.06% premium over the average closing price for the 30 trading days, and a 61.29% premium over the closing price for the 60 trading days. Affected by this, the company's stock price opened high and trended upward on the next trading day after the announcement, with huge volume, rising more than 35% at its peak, and closing at HK$1.345, still up 24.54%. It is worth noting that the company expects the court meeting and extraordinary general meeting to be held on or around November 2026. All independent shareholders are entitled to attend the extraordinary general meeting and vote on the ordinary resolution approving the scheme of arrangement. The privatization plan is highly likely to be approved, mainly for two reasons: First, the company's stock has had low actual trading prices and low average daily trading volumes in recent years. Over the past 6 months and 12 months, the average daily trading volume accounted for only approximately 0.13% and 0.16% of the issued share capital, respectively. The prolonged sluggish trading is mainly due to investors' pessimistic expectations for the current macroeconomic environment and the consumer sector, resulting in a lack of liquidity and distorted value discovery for the sector and individual stocks, with valuations remaining below their value for an extended period. Second, the privatization price offers a high premium, exceeding 50% compared to the premiums for the 30-day, 60-day, and 120-day periods before the announcement, and higher than every closing price from March 26, 2025 to date. In the absence of liquidity, directly selling in the market would severely depress the stock price, making it impossible to exit at a reasonable price. However, the current privatization by the offeror provides minority shareholders with an exit at a relatively high return level, resulting in a high willingness to accept. Furthermore, the offeror's willingness to privatize at a premium and with full cash payment also aligns with the best interests of minority shareholders. So why is Song Zhenghuan and parties acting in concert privatizing GOODBABY INTL at this time? As mentioned above, the company lacks liquidity and has distorted value discovery, with a current PB ratio of only 0.3 times and a dividend yield exceeding 15%. For a listed company, an undervalued market capitalization actually diminishes the status of the listing platform, provides little help in financing, and significantly reduces investment and financing capabilities. For the founder and parties acting in concert, they would prefer the company to develop better; having the listing platform reduced to an empty shell with a market value that does not match its value weakens brand image and value. Moreover, maintaining a listing platform requires certain expenses. Privatization can save significant costs, including administrative, compliance, and other listing-related expenses. If the privatization is successfully completed, the above expenses will no longer be incurred, allowing the company to allocate more resources to business development. If this privatization proceeds smoothly, GOODBABY INTL will apply to withdraw its Hong Kong listing status and will focus more on performance growth and improving profitability targets. GOODBABY INTL's fundamentals have shown recovery. Its business includes wheeled strollers and car seats, with a diversified brand portfolio including CYBEX, Evenflo, and gb, driving total revenue of HK$4.551 billion, a year-on-year increase of 5.8%. Among these, the CYBEX brand accounts for the largest share of revenue, at HK$2.71 billion in the first half of 2026, a year-on-year increase of 10.52%, accounting for 59.6% of revenue. The company also has a globally balanced omnichannel distribution platform, with revenue mainly distributed across Asia-Pacific, the Americas, and Europe, Africa, the Middle East, and India, with first-half revenue shares of 20.3%, 32.4%, and 47.3%, respectively. In the first half of 2026, the company's profitability improved. Gross profit grew 19.7%, and gross margin increased 6.6 percentage points to 56.2%. Various expenses were notably optimized. Operating profit was HK$431 million, a year-on-year increase of 113.4%, and net profit was HK$277 million, a year-on-year increase of 162.3%. Operating margin and net margin rose to 9.47% and 6.09%, respectively. More importantly, the company has persisted in paying dividends. In March 2026, it announced a final annual dividend of HK$0.05 per share, and in August it announced an interim dividend of HK$0.2 per share. The two dividends totaled HK$0.25, which at the current price translates to a dividend yield exceeding 18%. However, it should be noted that although net profit was approximately HK$277 million, HK$198 million of that was attributable to U.S. tariff refunds. Excluding this factor, its core main business actually did not perform as strongly as it appears on the surface. As for dividends, other listed companies have recently increased dividends after domestic announcements of offshore trust policies, but it is estimated that such a high dividend ratio may not necessarily be sustained long-term. Overall, this privatization of GOODBABY INTL represents a triple-win situation for the offeror, the company, and shareholders. Minority shareholders can exit through the offeror's high-premium return; the offeror can obtain more equity, focus resources on company development, and share in the company's long-term development results; and for the company, focusing on business and markets, with gradually recovering fundamentals, the achievement of growth and profitability targets can better guide value discovery.