VC-backed Sungy receives management take-private offer

Yuqiang Deng, Sungy's founder, chairman and CEO, and co-COO Zhi Zhu are willing to pay $4.90 per share for all outstanding American Depository Shares (ADS), according to a release. This values the company at approximately $155 million.

There is as yet no information on how the transaction will be financed, or whether other investors will participate. As of March 2014, Deng owned 22.1% of the company, while IDG Capital Partners held 20.2%. China Broadband Capital, WI Harper and Jafco had stakes of 10.3%, 6.9% and 6.8%.

Sungy raised $78.54 million through its IPO in November 2013 as Chinese technology companies started to regain favor with US investors. It priced its shares at $11.22 apiece, towards the high end of the indicative range, and then saw the stock jump 19% on debut. Sungy touched $30.00 in March of last year but has since fallen off dramatically. It closed at $5.06 on April 13, down 73% on a one-year basis.

The company recorded revenue of RMB369.2 million ($59.4 million) for 2014, up from RMB328.8 million the previous year, but R&D, marketing and general expenses more than doubled. Sungy swung from a net income of RMB91.8 million in 2013 to a net loss of RMB47.7 million last year.

Responding to the disappointing earnings, Deng said the slowdown was the expected result of a temporary shift in focus from monetization to marketing and product development, with a view to strengthening and expanding the user base and product portfolio.

"We believe that these initiatives have begun to take hold but will require some time before bearing fruit," he added. It appears Deng has concluded that this transition would be most easily made under private ownership.

Sungy's platform product, GO Launcher Ex, launched in 2010 and had attracted approximately 268 million users worldwide as of December 2013. The apps that run off this platform are designed to improve smart phone functionality and performance and aid personalization. In addition to the GO platform and products, Sungy operates a mobile internet portal and mobile reading services.

In February 2014, the company acquired GetJar, a VC-backed US mobile ad network. GetJar started out as an app store but later pivoted into an Android app recommendation service.

AVCJ Research's records show that IDG provided seed capital to Sungy in 2005. IDG, WI Harper and Jafco then committed two rounds of funding in 2006 and 2009, before CBC joined a Series C round in 2010, which also featured CBC and WI Harper.

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• Topics
• Buyouts
• Exits
• Technology
• Consumer
• Greater China
• China
• TMT
• Consumer
• buyout
• Exit
• IDG Capital Partners
• CBC Partners / CBC Capital
• JAFCO
• WI Harper Group