VC-backed iDreamSky gets take-private offer
IDreamSky Technology, a VC-backed Chinese mobile game publisher, has received a take-private proposal from its chairman and CEO barely 10 months after going public on NASDAQ.
Michael Chen is offering to pay $14.00 per share for all outstanding American Depository Shares (ADS), according to a regulatory filing, in a deal that values the company at approximately $609 million. This represents a 3.8% deficit to the June 12 closing price, although the stock has gained 25% in the last five trading days. It peaked at $23.66 in September but ended May at $10.45.
The offer is yet further evidence of the draw of China's strong-performing domestic markets. Entrepreneurs and investors want to leverage the perceived valuation arbitrage that can be achieved by re-listing businesses on home bourses. This the sixth privatization bid for a US-listed Chinese company announced in the past fortnight.
As of December 2014, Chen held a 22.1% stake in iDreamSky but his voting power was nearly twice that as a result of the dual-shareholding structure. Legend Capital and Redpoint Ventures had 15.5% and 12.6%, respectively.
The company received initial funding from Legend Holdings' Legend Star Incubator program in 2011. The following year, affiliates of Legend Star, plus Legend Capital and Redpoint, contributed $6.9 million in Series B funding. A Series C round worth around $9 million came the following year, provided by Legend Capital and Redpoint. The company raised $116 million in its IPO in August of 2014.
Shenzhen-based iDreamSky was founded in 2009, and claims to be the largest third-party mobile game publishing platform in China, based on the number of active users in 2014, with a market share of 26.5%. In the fourth quarter of last year, it had 110.6 million monthly active users. The company generated 113.5 million game downloads and activations in 2014, up 16.2% year-on-year.
Revenue came to RMB984.1 million ($158.5 million) last year, compared to RMB244.8 million in 2013. However, rising administrative and marketing costs saw the company slip from a RMB27.8 million net profit to a RMB16.7 million net loss.
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