Hony in talks to join Giant Interactive take-private - report

According to Reuters, Hony may cover a portion of an equity tranche worth as much as $500 million that has been made available to co-investors. The consortium already controls around 47.2% of Giant, with most of this equity held by Yuzhu Shi, the company's chairman. Baring Asia owns 4.9%.

The consortium estimated in December that, based on the offer price of $11.75 per American Depository Share, it would require approximately $1.42 billion to acquire the 121 million outstanding shares in Giant. This will be provided through a combination of debt and equity capital.

Baring Private Equity Asia V, a pan-regional fund that closed in early 2011 at $2.46 billion, will provide a portion of the equity and, given the size of the transaction, reports of negotiations with potential co-investors are not surprising.

The only comparable private equity-backed transaction involving a US-listed Chinese company of comparable size, the $3.7 billion take private of Focus Media, featured $1.52 billion in aggregate debt provided by a syndicate of 18 banks. The equity portion came from The Carlyle Group, FountainVest Partners, CITIC Capital Partners and China Everbright. Company management and Fosun International rolled their shares into the deal.

Giant has previously received private equity backing from Susquehanna Asia Investment, which committed $50 million in August 2007, ahead of the company's IPO. The offering raised $886 million in October of the same year, with Standard Chartered Private Equity investing $25 million through the IPO.

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.

Hony has participated in one other take-private, completing the acquisition of Simcere Pharmaceutical in partnership with company management in December 2013. The deal, which won board approval four months earlier, valued the company at $490 million.

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• Topics
• Greater China
• Technology
• Buyouts
• Hony Capital
• Baring Private Equity Asia
• buyout
• TMT
• China