Shanda Games (GAME +10.8%) has received a non-binding going-private proposal letter from parent Shanda Interactive and an affiliate of Chinese investment firm Primavera Capital. The offer, meant to be financed through a combo of equity and debt, values Shanda Games at $1.9B, or $6.90/share. (PR)
Shanda's board is evaluating the offer; the would-be acquirers already own 76.2% of the company.
Though up sharply, shares still trade 9% below the offer price, which suggests a fair amount of investor skepticism exists. Peer Giant Interactive (GA +1.1%) received a going private offer in November. Giant's shares still trade 7% below their offer price.
Giant Interactive's (GA -1.1%) special committee of the board retains Morgan Stanley Asia and Duff & Phelps as its financial advisors to consider the non-binding proposal from Chairman Yuzhu Shi and Baring Private Equity Asia to take Giant private at $11.75/share.
Giant Interactive (GA +11.5%) founder/chairman Yuzhu Shi and P-E firm Baring Private Equity Asia have offered, through a preliminary non-binding proposal letter, to take the Chinese online game developer private for $11.75/share, or $2.8B. (PR)
The price represents a 16% premium to Giant's Friday close, and a 4% premium to where shares currently trade. Shi and Baring collectively own 47.2% of Giant.
Shi is far from the first founder of a Chinese tech company to make a going-private offer. His proposal values Giant at a little over 9x 2014E EPS after backing out $610M in cash/investments.
Shanda (GAME) is nosediving as investors balk at the price it's paying to acquire affiliates responsible for handling its online game billing and customer service work, among other activities.
One of the affiliates (Shengzhan) owns valuable data about user activity. The other (Shengjiang) runs a network that sells 2M+ real/virtual prepaid gaming cards via 180K distribution channels.
Shanda claims service fees paid to the affiliates made up 21.3% of its Q1 revenue, and that buying the companies will help it deliver the kind of integrated platform it considers crucial for mobile success.
Shanda is paying for the deals with cash, deferred payments, and the settlement of an outstanding loan receivable.
Fellow online game providers NetEase (NTES -2.6%), Qihoo (QIHU -4.1%), Perfect World (PWRD -5.3%), and Giant Interactive (GA -5%) are selling off. Sohu and subsidiary Changyou's disappointing Q2 results and Q3 guidance are the main trigger, though a moderate selloff in Shanghai isn't helping either.