Gobi makes lucrative early exit from CIB

As it turns out, an investment that was already delayed into 2011 has proved short-lived but lucrative. A 61.7% stake CIB held by Gobi and a consortium of angel investors last week sold to Asiasoft, a larger regional online games operator, for S$11 million ($8.7 million). Gobi has reaped an IRR of 60% though the exit of its substantial minority holding in the company.

"Asiasoft hasn't been so successful in Malaysia," says Kay Mok Ku, a partner with Gobi. "They have Thailand, Singapore and Vietnam but struggled in Malaysia. The acquisition of CIB means they can cover more of Southeast Asia." Indeed, the transaction means Asiasoft's market share in Malaysia will rise to 43% from 17%. The existing CIB management team will be retained and run the two firms' combined operations.

China-based and largely China-focused, Gobi expanded into Singapore in 2010. Its search for attractive companies in the IT, digital media and technology space has led to investments in Time Voyager, one of the first Southeast Asian game developers to secure a publishing relationship with a major Chinese developer, and Apps Foundry, which operates one of the largest mobile Internet publishing platforms in Indonesia.

CIB, a massively multiplayer online role playing game (MMORPG) specialist founded in 2003, represented an opportunity to broaden this online gaming expertise.

Gobi initially wanted to list CIB through a reverse takeover but that failed after a poison pill was activated in the target company. The strategy switched to an IPO on the Malaysian Stock Exchange alongside the ongoing pursuit of partnership opportunities. A listing was scheduled for the third quarter of 2011.

"Our plans were bigger than just doing a gradual sell down," says Ku. "We would have set up in Singapore and used it as a springboard to expand into Indonesia. The Singapore government is proactive with gaming companies in terms of publishing and development work." There were also plans to help CIB diversify from MMORGs into casual gaming, but the IPO triggered interest from Asiasoft.

The acquisition speaks volumes for the fragmentation of online gaming in Southeast Asia. Most of the games are developed in China, South Korea and Taiwan, which means Southeast Asia is little more than a publishing market. However, the fact that Asiasoft is increasing its Malaysia footprint through M&A rather than organic growth is evidence of how customer preferences vary from country to country. Identifying which games are likely to gain traction is as much art as science.

"You need to understand the market to enter it," adds Ku.

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• Topics
• Exits
• Southeast Asia
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• Gobi Partners
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• TMT
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