IDG backs take-private bid for China’s KongZhong
IDG Capital Partners and the chairman and CEO of online game developer KongZhong Corporation have submitted a take-private bid for the company. It values the business at approximately $388 million.
Leilei Wang, the chairman and CEO, and IDG-Accel China Growth Fund II are willing to pay $8.56 per share for all outstanding American Depository Shares (ADS), according to a regulatory filing. This represents a 16% premium to the June 29 closing price. The stock closed on June 30 at $7.37.
As of March 2015, Wang held a 19.4% stake in the business, while the IDG-Accel fund had 5.3%.
KongZhong provides a combination of internet games, mobile games and wireless value-added services. The company operates China's largest military gaming platform, with titles including World of Tanks, World of Warplanes and World of Warships. It entered the smart phone game market in 2011 and currently has 10 games under development.
KongZhong posted $227.6 million in revenue last year, up from $173.6 million the previous year. Net income dropped to $24.6 million from $29.6 million over the same period.
This is the 25th US-listed Chinese company to receive a buyout offer so far this year, as chairmen nurture ambitions to go public domestically, Bloomberg reported. The largest of these is for internet security software provider Qihoo 360 Technology, which values the company at approximately $9.9 billion.
The KongZhong offer comes despite a recent slide in mainland stock prices. The Shanghai Composite Index peaked at 5,116 points in mid-June but has since dropped 21.5%, although it is still up 25% year-to-date. The Shenzhen bourse has seen similar declines.
KongZhong, which went public in 2004 at $10 per share, trades at a price-to-earnings multiple of around 18. The average P/E ratio for Shanghai-listed companies is 19.85; on the Shenzhen main board it is 33.78, and then 63.32 on the city's SME Board and 102.38 on Chinext.
The IDG-Accel China Growth Fund II is managed by IDG Capital Partners. It closed at $560 million in 2007.
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