According to Zhitong Finance APP, on September 27, Goodbaby International (01086) and the offeror Crystal Aurora International Ltd. jointly announced a privatization proposal, under which the offeror will pay a cash cancellation price of HK$1.5 per scheme share to scheme shareholders, with the total consideration including the share option portion amounting to a maximum of approximately HK$1.322 billion.

After the scheme becomes effective, all scheme shares will be cancelled and extinguished, 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 chairman and executive director, and 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 carries a very high premium, representing a premium of approximately 38.89% over the closing price quoted on the Stock Exchange on the last trading day before the announcement, a premium of 53.06% over the average closing price for the 30 trading days and a premium of 61.29% over the closing price for the 60 trading days.

Affected by this, the company's share price opened higher and climbed further on the next trading day after the announcement, with massive volume, rising more than 35% at one point and still closing at HK$1.345, 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, and 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 shares have seen low actual trading prices and low average daily trading volume in recent years, with average daily trading volume over the past 6 months and 12 months accounting 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 below their value for an extended period. Second, the privatization price carries a high premium, exceeding 50% compared with the premiums over the 30, 60 and 120 days before the announcement, and higher than every closing price from March 26, 2025 to date.

In the absence of liquidity, selling directly in the market would severely depress the share price, making it impossible to exit at a reasonable price, but the current privatization by the offeror gives minority shareholders a relatively high return level to exit, so their willingness to accept is high. In addition, the offeror's willingness to carry out privatization at a premium and in full cash payment also serves the best interests of minority shareholders.

So why is Song Zhenghuan and parties acting in concert privatizing Goodbaby International at this time? As mentioned above, the company lacks liquidity and suffers from distorted value discovery, with a current PB ratio of only 0.3 times and a dividend yield of over 15%. For a listed company, an undervalued market capitalization actually lowers the status of the listing platform, provides little help in financing and greatly reduces investment and financing capabilities.

For the founder and parties acting in concert, they would prefer the company to develop better, as the listing platform becoming an empty shell and the mismatch between market value and value weaken brand image and value. Moreover, maintaining a listing platform requires certain costs, and privatization can save significant expenses, 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 the privatization proceeds smoothly, Goodbaby International will apply to withdraw its Hong Kong listing status and will focus more on performance growth and improving profitability targets. Goodbaby International's fundamentals have recovered, with businesses including wheeled pushchairs and car seats, and a diversified brand portfolio including CYBEX, Evenflo and gb, driving total revenue of HK$4.551 billion, up 5.8% year on year.

Among them, the CYBEX brand accounts for the bulk of revenue, contributing HK$2.71 billion in the first half of 2026, up 10.52% year on year, 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 EMEA-India, accounting for 20.3%, 32.4% and 47.3% of first-half revenue, respectively.

In the first half of 2026, the company's profitability improved, with gross profit rising 19.7%, gross margin increasing 6.6 percentage points to 56.2%, and various expenses notably optimized. Operating profit was HK$431 million, up 113.4% year on year, and net profit was HK$277 million, up 162.3% year on year, with operating margin and net margin rising to 9.47% and 6.09%, respectively.

More importantly, the company has persisted in paying dividends. In March 2026, it declared a final annual dividend of HK$0.05 per share, and in August it declared an interim dividend of HK$0.2 per share, with the two dividends totaling HK$0.25, translating into a dividend yield of over 18% based on the current price. However, it should be noted that although net profit was approximately HK$277 million, HK$198 million of that came from US tariff refunds, and excluding this factor, its core main business was actually not as strong as it appeared on the surface.

As for dividends, other listed companies have also 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 over the long term. Overall, this privatization of Goodbaby International is a win-win-win situation for the offeror, the company and shareholders. Minority shareholders can exit with a high premium return from the offeror; the offeror can obtain more equity, focus resources on the company's development and share in the company's long-term development results; and for the company, by focusing on business and markets and relying on gradually recovering fundamentals, the realization of growth and profitability targets can better guide value discovery.