Baring Asia, Hony agree Giant Interactive take-private
Chinese online game developer Giant Interactive has accepted a buyout offer from a consortium including Baring Private Equity Asia, Hony Capital and company management. It values the New York Stock Exchange-listed business at approximately $2.9 billion.
The consortium will pay $12.00 per American Depository Share, an 18.5% premium to closing price on November 22, the day before the initial bid was tabled. Baring Asia and Yuzhu Shi, Giant's chairman, originally offered $11.75 per share.
The transaction is expected to close in the second half of 2014, pending a shareholder vote, after which the company will de-list. At least two thirds support from all shareholders participating in the vote is required for the deal to go through.
The consortium currently owns approximately 49.3% of Giant, the majority of which is held by Shi. He will see his stake fall to half its current level post-transaction, receiving a cash payment and the issue of a promissory note worth $450 million in return.
The transaction will be financed through a combination of rollover equity from Shi and Baring Asia and fresh capital committed by Baring Asia and Hony. China Minsheng Banking Corp, BNP Paribas, Credit Suisse, Deutsche Bank, Goldman Sachs, ICBC International and J.P. Morgan have also agreed to underwrite and arrange $850 million in aggregate debt financing.
This will be the second-largest private equity-backed take-private of a US-listed Chinese company following the $3.7 billion acquisition of Focus Media by The Carlyle Group, FountainVest Partners, CITIC Capital Partners and China Everbright, in conjunction with company management and Fosun International. That deal featured $1.52 billion in aggregate debt provided by a syndicate of 18 banks.
AVCJ Research has records of 12 such deals being completed since August 2011. At least 15 more are still in process. Hony previously backed the $490 million take-private of Simcere Pharmaceutical, which de-listed in December 2013.
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.
Founded in 2004, Giant focuses on massively multiplayer online role playing games and currently operates 13 titles. 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.
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