Orient PE unit bids for China mobile games developer
A private equity unit of Chinese brokerage Orient Securities has submitted a take-private bid for NASDAQ-listed game developer China Mobile Games & Entertainment Group (CMGE).
Orient Hongtai Investment Management is willing to pay $21.50 per share for all outstanding American Depository Shares, which represents a slight premium to the May 15 closing price. Following a spike in the stock price in response to the announcement of the offer, CMGE shares fell back to close at $19.88 on May 19.
Orient Hongtai has secured equity financing from certain affiliates and co-investors worth an aggregate RMB5 billion ($806 million), according to a regulatory filing. The offer values CMGE at approximately $690 million.
CMGE is China's largest publisher of mobile games based on gross billing, with a 20.1% market share as of the fourth quarter of 2014, according to Analysys International. It also ranks among the top 10 mobile game developers in the country. The company offers an integrated pipeline encompassing the development, licensing, publishing, distribution and operation of games.
It had 42.8 million paying users as of year-end 2014, including 21.1 million paying users of social games. CMGE's portfolio comprises 83 social games, 430 game bundles and 238 single-player games. It plans to launch 33 social games and 12 single-player games this year, over half of which will be developed internally.
The company is largely the product of three acquisitions in 2009 and 2010 of businesses focusing on mobile game development and handset design. It was restructured in 2011 and went public on NASDAQ the following year.
Lijun Zhang, CMGE's chairman, remains the largest shareholder with a 46% interest. Champion Plus Group, a vehicle controlled by private equity fund Zennon Capital Partners, has 6.7%, having participated in a $25 million private placement in 2013 alongside Hong Kong-based New World Development.
CMGE posted revenue of RMB1.26 billion ($203.8 million) in 2014, up from RMB353 million the previous year. Net profit rose from RMB26.8 million to RMB227.9 million over the same period.
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