China Calling

Reverse mergers are becoming more popular with Chinese companies looking to get a U.S. stock listing.

Chinese companies see a reverse merger as a way to get access to funds in the U.S. while avoiding some of the regulatory barriers in seeking an initial public offering.

Some current shells

"There is a tremendous amount of activity coming out of China," said Daniel K. Donahue, a partner with Preston Gates & Ellis LLP in Irvine. His law firm, which specializes in mergers and acquisitions and corporate finance, has offices in major Chinese urban areas.

Preston Gates is working on a reverse merger involving a Beijing manufacturing company that will raise $20 million in an equity placement at the same time as the merger.

"It has strong management and is large," Donahue said. "It would be a strong IPO candidate, but it's choosing to do a reverse merger."

China BAK Battery Inc., which used a reverse merger to get a stock listing and attract funds, recently gave a pitch on its business strategy at the Roth Capital Partners LLC's conference in Dana Point.

Its year-ago reverse merger and listing took three-and-a-half months and raised $17 million. China Bak makes and distributes lithium ion rechargeable batteries for cell phones, laptops and portable music devices.

"For Chinese companies, the big attraction also is the prestige of getting a listing on the U.S. stock market," said Brett Goetschius, executive editor of DealFlow Media.

-Pat Maio