Shanda Games Gets Offer From Shareholder To Be Taken Private For $1.9 Bln

( - Chinese online game developer Shanda Games Ltd. ( GAME ) said Monday that it has received a $1.9 billion offer to be taken private by a consortium comprising its controlling shareholder Shanda Interactive Entertainment Ltd. and an affiliate of investment firm Primavera Capital Limited. Shares of Shanda Games are gaining almost 11 percent in the regular trading session following the announcement.

According to the preliminary non-binding proposal, the consortium has proposed to acquire Shanda Games in a 'going private' transaction for $3.45 per class A or class B ordinary share, or $6.90 per American Depositary Share. Each ADS represents two class A ordinary shares.

The offer price represents a 22 percent premium to Shanda Games' closing stock price of $5.65 per share on the Nasdaq on Friday. Based on the offer price, the proposal values the company at about $1.9 billion in fully enlarged equity value.

As of January 27, 2014, the consortium members beneficially owned about 76.2 percent of the company's outstanding shares.

The consortium plans to finance the transaction with a combination of equity capital funded by the consortium members and third-party debt.

The consortium's proposal letter has stated that the proposal constitutes only a preliminary indication of its interest and is subject to negotiation and execution of definitive agreements relating to the proposed transaction.

Shanda Games said its board is reviewing and evaluating the consortium's proposal. The company expects its board to form a special committee consisting of independent directors to evaluate the proposal as well as to consider other strategic options available to the company.

The company cautioned its shareholders and others considering trading its securities that its board has just received the proposal letter and has not made any decision with respect to the company's response to the offer.

In late November 2013, Shanda Games reported a 2 percent decline in profit for the third quarter from the prior year, reflecting lower margins and higher costs.

The company's third-quarter net income was RMB 398.9 million or $64.9 million, down from RMB 405.2 million in the prior-year quarter. However, earnings per ADS increased to RMB 1.50 or $0.24 from RMB 1.46 in the year-ago quarter. Earnings per share was RMB 0.75 or $0.12, up from RMB 0.73 last year.

Total net revenues for the third quarter increased 3 percent to RMB 1.12 billion or $182.9 million from RMB 1.09 billion in the same quarter last year. The company generates a majority of its revenue from massively multi-player online or MMO games.

In late July 2013, Shanda Games agreed to acquire two affiliates from its parent company Shanda Interactive Entertainment Ltd. for $811.5 million. Shanghai Shengzhan Networking Technology Co. Ltd. and Tianjin Shengjing Trade Co. Ltd. are both entities under the common control of Shanda Interactive that provide user and payment platform services.

In Monday's regular session, GAME is trading at $6.26, up $0.61 or 10.80 percent on a volume of 1.26 million shares.

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