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Giant Interactive Receives Buyout Offer

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One of China’s leading online game developer Giant Interactive Group Inc has recently received a proposal from its chairman Yuzhu Shi and an affiliate of BaringPrivate Equity Asia (collectively called ‘consortium’) to buy the company for about $2.82 billion in cash.

Per the non-binding proposal, the consortium has proposed to acquire all of the shares for $11.75 per American Depositary Share (ADS) (each ADS representing one ordinary share of the company). The deal will be financed using a combination of debt and equity capital. As of Nov 25, the consortium owned about 47.2% of the company's shares.

Giant Interactive is currently evaluating the preliminary offer and is undertaking a fair process to evaluate the proposal and negotiate terms to provide maximum value to its shareholders.

Earlier this month, Giant Interactive reported its third quarter 2013 results, wherein its adjusted earnings increased 1% on the back of top-line growth. Net revenue grew 8.6%, driven by increase in active paying accounts for online games and increase in average revenue per user for online games. Gross profit also increased 9.5% on account of higher sales.

The company is positive for 2014 as it is expected to launch several mobile games. The company has a prudent expense management system and it continues to explore other cost effective distribution channels to enhance profitability. The company is therefore expected to look into the best interest of Giant Interactive shareholders while considering the offer.

Giant Interactive is a leading online game developer and operator in China in terms of market share and focuses on massively multiplayer online role playing games.  Currently, Giant operates multiple games, including the ZT Online 1 Series, ZT Online 2, Elsword, and World of Xianxia.

Giant Interactive holds a Zacks Rank #3 (Hold). Other better ranked Internet retailers include Taomee Holdings Ltd , YY Inc (YY - Free Report) and Brightcove Inc (BCOV - Free Report) . While Taomee and YY hold a Zacks Rank #1 (Strong Buy), Brightcove holds a Zacks Rank #2 (Buy).

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