Game-off

29 January 2014 By Una Galani Follow @ugalani

Shanda Games’ biggest shareholder is leading a $1.9 billion bid to take the Nasdaq-listed game developer private, valuing it at 7 times forecast earnings. Giant Interactive’s board is mulling a similar offer. Other cash-rich and lowly-valued rivals may be tempted to follow.

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Shanda Games said on Jan. 27 it had received a non-binding takeover offer from a consortium led by its leading shareholder, valuing the U.S.-listed Chinese online gaming developer and operator at $1.9 billion.

The consortium of Shanda Interactive and Primavera Capital, which already own a combined stake of 72.6 percent of the company, proposed to pay $6.90 cash per American Depositary Share (ADS), or $3.45 per class A or class B ordinary share. One ADS is equivalent to two class A ordinary shares.

The offer for the depositary shares represents a 15 percent premium to the closing price on Jan. 24. Shanda’s ADS’ closed at $6.40 on Jan. 28.

The offer will be financed with a combination of equity capital from the consortium members and third-party debt. Shanda, whose flagship games include Mir 2 and Woool, had a net cash position of $425.7 million as of Sept. 30, 2013.

Shanda said its board is reviewing the offer and will form a special committee of independent directors to evaluate the offer. The company went public in 2009, at a price of $12.5 per ADS.

Rival Giant Interactive Group is still evaluating a similar offer it received from a consortium led by its chairman in November, valuing the U.S. listed Chinese gamer at $2.9 billion.

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