Baring, Hony, CDH complete Giant Interactive take-private

Shareholders voted in favor of an offer of $12 per American Depository Share, an 18.5% premium to the closing price on November 22, the day before the bid was tabled. Baring Asia and Yuzhu Shi, Giant's chairman, initiated the process with an offer of $11.75 per share. Hony joined the consortium in January 2014, two months before the board accepted the improved offer, and then CDH joined in May.

Giant's stock was suspended from trading last Friday and deregistration will be completed within 90 days. The consortium owns approximately 49.3% of Giant, the majority of which is held by Shi. The transaction will be financed through a combination of debt, rollover equity from Shi and Baring Asia and fresh capital committed by Baring Asia, Hony and CDH.

Baring agreed to buy a 4.9% stake in Giant from a Shi-owned vehicle in November 2013, paying $115.5 million, although it will contribute an additional $26.1 million so to match the take-private valuation. Baring's original equity commitment to the transaction was $333.4 million, with Hony putting in a further $475 million. However, CDH subsequently came in with $150 million, reducing the Baring and Hony contributions by $100 million and $50 million, respectively.

Baring will hold a 22.5% interest in Giant post-transaction, with Hony owning 25.5% and CDH on 8.99%. Shi will control 43% of Giant post-transaction but as part of the original take-private agreement with Baring Asia, he committed to selling shares worth approximately 22.5% of the company. In return, he will receive up to $227.9 million in cash and a promissory note worth $450 million.

China Minsheng Banking Corp, BNP Paribas, Credit Suisse, Deutsche Bank, Goldman Sachs, ICBC International and J.P. Morgan are the lead arrangers and bookrunners for $850 million in aggregate debt financing for the transaction.

Founded in 2004, Giant focuses on massively multiplayer online role playing games and currently operates 15 titles, of which 12 are self-developed, including four under the successful ZT Online franchise. It has a development team of 840 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 RMB1.33 billion ($220.7 million) for 2013, up from RMB1.1 billion the previous year. Net revenues for 2013 came to RMB2.36 billion. It had peak quarterly users for the period of 2.32 million and 697,000 average quarterly concurrent users.

This is 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.

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• Topics
• Buyouts
• Greater China
• Technology
• Consumer
• Baring Private Equity Asia
• Hony Capital
• CDH Investments Management
• buyout
• China
• TMT