Chinese direct lender set to join NASDAQ post-merger

The all-equity acquisition of a Western Chinese non-bank lender by NASDAQ-listed DT Asia Investments will mean the lender, renamed China Direct Lending Corporation, will be listed in the US.

DT Asia Investments has bought Chinese SME lender Urumqi Feng Hui Direct Lending Co. and will rename it China Direct Lending Corporation. 

Special purpose acquisition company DT Asia raised $60 million from an initial public offering of DT Asia Investments on the NASDAQ in October 2014. The capital raise was explicitly intended to finance an acquisition and, as a result, China Direct Lending Corporation will trade publicly in the US and will be the first Western Chinese alternative lender listed there. 

DT Asia is sponsored by DeTiger Holdings which is controlled by Winnie Ng. 

Urumqi Feng is owned by parent Adrie Global Holdings Limited, which is also known as China Lending Group.

The lender was founded in 2009 and lends to micro, small and medium-sized businesses (MSMEs) and consumers. Less than 5 percent of MSME borrowers have access to commercial bank capital in China, according to a statement by DT Asia Investments announcing the deal. 

Loans range from 5,000 to 30 million yuan in size. 

The alternative lender is headquartered in Urumqi, the capital of Xinjiang and had registered capital of $94.2 million as of 30 September. It is one of the largest direct lenders in the Western region of China. 

The share exchange deal will see China Lending Group shareholders receive 20 million ordinary shares in DT Asia which will issue fresh equity to finance the transaction and will seek a minimum of $12 million in gross proceeds from the offer. Of the 20 million shares, eight million will be held in escrow and subject to forfeit if the lender fails to meet net income targets for the next three years. 

DT Asia plans to implement a new dividend policy paying shareholders the equivalent of 15 percent of 2015 net income rising to 25 percent of net income from 1 January after the deal closes. 

The deal should close in the first quarter of 2016. 

Stephen Cannon, DT Asia’s chief executive said: “We believe that China Lending Group’s low risk approach, its high growth and high margin business represents a very attractive opportunity for our shareholders.”

“Following the business combination, China Direct Lending Corporation will be the first US publicly listed finance company in western China, focused on the financing needs of micro, small and medium business enterprises and entrepreneurs based on rigorous lending criteria. The prestige and transparency which comes from a NASDAQ listing and our position as the first finance company of its kind in Xinjiang Province – a gateway to the “New Silk Road” – positions us well to capitalize on our extraordinary growth opportunity,” said Jingping Li, co-founder and chief executive of China Lending Group.