Baring Asia backs $2.8b Giant Interactive take-private
Baring Private Equity Asia is supporting a management buyout of Chinese online game developer Giant Interactive Group that values the New York Stock Exchange-listed company at approximately $2.8 billion. If the deal goes through it would be the second-largest PE-backed take-private of a US-listed Chinese company after Focus Media.
According to a regulatory filing, a consortium led by Baring Asia and Yuzhu Shi, Giant's chairman, are offering to buy all outstanding American Depository Shares (ADD) for $11.75 apiece in cash. This represents a 21% premium to the volume-weighted average price on Giant's previous close.
The stock closed on Monday at $11.41, up 12.6%, following the announcement of the offer.
The consortium currently owns around 47.2% of Giant. According to the company's 2012 annual report, Shi held a 54.8% stake. The consortium plans to finance the acquisition with a combination of debt and equity capital.
Susquehanna Asia Investment committed $50 million to Giant in August 2007, ahead of the company's IPO, which raised $886 million in October of the same year. Standard Chartered Private Equity invested $25 million through the IPO.
Giant's independent directors include: Andrew Yan, founding managing partner of SAIF Partners; Jason Jiang, the chairman and CEO of Focus Media who partnered with a PE consortium last year to take the company private in a $3.7 billion deal; and Peter Schloss, a partner at Phoenix Media Fund, a PE vehicle set up by Hong Kong's Phoenix Television Group.
Founded in 2004, Giant focuses on massively multiplayer online role playing games and currently operates 13 titles, including the ZT Online 1 Series, ZT Online 2, Elsword and World of Xianxia. It has a development team of 914 people and a distribution network that reaches 99,000 retail outlets, including internet cafes, software stores, supermarkets and bookstores, where users can buy game credits.
The company is in the process of developing web games and mobile games. It also generates revenue by licensing its games in markets beyond China.
Giant posted net income of RMB1.1 billion ($180.5 million) in 2012, up from RMB906.4 billion the previous year. Net revenues came to RMB2.2 billion. It had peak quarterly users for the period of 2.37 million and 691,000 average quarterly concurrent users.
A total of 10 PE-backed take-privates of US-listed Chinese firms have been completed since August 2011. A further 13, including Giant, are still in process. Baring Asia was a participant in two previous transactions - Harbin Electric and Ambow Education - but quickly dropped out. The Harbin Electric deal eventually came to fruition with Abax Global Capital.
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