Qihoo 360 Going Private at a Bargain Price?

Most investors in Qihoo 360 Technology Co. Ltd. (NYSE: QIHU), China’s leading provider of Internet and mobile security products, woke up Friday morning to an announcement that the company is being acquired by a consortium of investors, including the company’s CEO, Hongyi Zhou, and board chairman Xiangdong Qi. The buyers are paying $77 in cash per American depositary share (ADS) in a deal worth $9.3 billion, including $1.6 billion in debt. Two ADSs represents three ordinary shares of common stock.

Hongyi proposed the acquisition back in June, and an independent committee of the board approved the merger. As if that would have made any difference: Hongyi and Xiangdong together controlled 62% of Qihoo 360’s stock.

According to Friday’s announcement, the merger represents a premium of 16.6% to the closing price of the company’s ADSs on June 16, 2015, the last trading day prior to the announcement of its receipt of a “going-private” proposal, and a premium of 32.7% to the average closing price of the company’s ADSs during the 30 trading days prior to its receipt of a “going-private” proposal.

The company said it expects the acquisition close in the first half of 2016.
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Writing at Forbes, one observer said that the buyers “get to take Qihoo private at a throwaway price given the fact that holders of the ADS were unable to correctly value the company.”

Qihoo 360’s ADSs closed at $71.81 on Thursday and traded up about 1.7% at $73 Friday morning. The 52-week range is $41.64 to $73.24, and the high was new on Friday.