Shanda -21.4% on M&A news; peers off thanks to Sohu/Changyou

Jul. 29, 2013 12:35 PM ETShanda Games Ltd (GAME-OLD)NTES, PWRD, GA, GAME-OLD, QIHUBy: Eric Jhonsa, SA News Editor1 Comment
  • Shanda (NASDAQ: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.
  • Shares had more than doubled since early May before today's plunge.
  • 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.

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