PE-backed consortium withdraws take-private bid for China’s Momo

The privatization group included Momo's co-founder, chairman and CEO Yan Tang and Alibaba Investment, a subsidiary of Alibaba Group. Other members were Matrix Partners China, Sequoia Capital China, Yunfeng Capital and Huatai Ruilian, according to a release.

"With the privatization proposal from the buyer group behind us, we are more committed than ever to driving business growth in the interest of the company and our shareholders," said Tang. He said the management team is confident in the growth prospects of the company.

Earlier this week, the firm reported a year-on-year decline of nearly 4.6% in monthly active users to 74.8 million in June 2016. However, its net profit increased to $15.4 million in the second quarter of this year from $1.7 million in the same period last year, while its net revenue rose 222% to $99 million over the same period, driven by its short video services. The new function allows to create and interact with short video stories in a fun and immersive way.

Last year, Momo's overall revenue reached $134 million, up from $44.8 million the previous year. Net losses reached $25.4 million, compared to $25.4 million and $9.3 million in 2014 and 2013, respectively.

Momo, which is best known for its "flirting" function, launched in August 2011 and racked up 10 million users within 12 months. The Momo app is downloaded free of charge and the company generates most of its revenue from subscription packages that include additional functions and privileges. Other revenue comes from mobile games, paid emoticons and marketing services.

The company listed on NASDAQ as recently as December 2014. Shortly in June 2015, Momo said it received a take-private proposal from Tang, Matrix, Sequoia and Huatai Ruilian Fund to acquire all of the company's outstanding American depositary shares (ADSs). In April this year, Alibaba and Yunfeng Capital - which is co-founded by Alibaba's Jack Ma - joined the investor consortium. The transaction valued Momo at around $3.5 billion.

Two months ago, the chairman and CEO of YY, a VC-backed Chinese social networking platform, also withdrew their take-private bid for the company. The move came as regulators study the impact of overseas-listed companies re-listing domestically through IPOs, M&A and restructurings.

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• Topics
• Greater China
• Buyouts
• Technology
• Venture
• China
• TMT
• Yunfeng Capital
• Alibaba Group
• Sequoia Capital
• Matrix Partners