PE firm CVC backs $1.3b bid for Chinese games developer Leyou

Customers at an internet cafe play online games in Beijing. Photographer:Nelson Ching/ Bloomberg

Private equity firm CVC Capital Partners is backing a bid by Chinese game firm iDreamSky Technology to take over its rival Leyou Technologies Holdings in a $1.3 billion deal, said four people with knowledge of the matter.

The consortium plans to make a binding HK$3.3 per share offer to take Hong Kong-listed Leyou private as soon as early April, the sources said.

The price represents an almost 30% premium to the HK$2.56 average price of Leyou‘s shares since January. On Thursday, its shares closed at HK$1.58.

Tencent-backed iDreamSky aims to hold a majority stake after it combines with Leyou, while CVC would have a significant minority stake, said two of the people.

Leyou‘s controlling shareholder, Charles Yuk, who owns 52.4% of the company, may retain a small stake after any deal, said one of the sources.

The move comes as iDreamSky, a large mobile game publisher, is investing to develop its own games, a speciality of Leyou which has developed the popular free-shooting games Warframe.

Leyou is also working with Amazon.com to co-produce an online game based on the fantasy literary work “The Lord of the Rings”.

Gaming is widely seen as a steady revenue source as users tend to keep playing popular titles for years.

China’s gaming industry, the world’s biggest, has also received a boost in recent weeks after the coronavirus outbreak forced many Chinese residents to stay at home, driving up game downloads.

iDreamSky has been in talks with Leyou‘s Yuk since the second half of 2019, said one of the sources.

More recently, the prospective buyer has been seeking co-investors to help finance a deal.

A representative for iDreamSky said the company would disclose the latest progress to the Hong Kong Stock Exchange in a timely manner and declined to comment further.

CVC declined to comment. Leyou did not respond to a request for comment.

iDreamSky on March 12 said it had entered into exclusive talks with Leyou and Yuk about a possible pre-conditional offer to acquire Leyou.

The same day, Leyou announced an exclusivity agreement in a stock exchange filing without naming the potential buyer.

Reuters

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.