Perfect World announced that it has entered into a Merger Agreement with Perfect Peony Holding. Perfect World has picked China Merchants Bank and Wing Lung Bank to supply a $900m loan for the deal, pursuant to a debt commitment letter, it said this week. Under the take-private, Perfect World would be merged with an entity called Merger Sub and continue to operate as a subsidiary of parent Perfect Peony Holding.
The Merger, which is currently expected to close during the second half of 2015, is subject to customary closing conditions including the approval of the Merger Agreement by an affirmative vote of holders of Shares representing at least two-thirds of the voting power of the Shares present and voting in person or by proxy at a meeting of the Company’s shareholders which will be convened to consider the approval of the Merger Agreement and the Merger. Mr. Michael Yufeng Chi, Founder of Perfect World, has agreed to vote all of Shares he beneficially owns in favor of the Merger Agreement and the transactions contemplated thereby. If completed, the Merger will result in the Company becoming a privately-held Company and will no longer be listed on the NASDAQ Global Selected Market.
There have been take-privates of Chinese gaming companies before. Perfect World’s deal follows those for Giant Interactive and Shanda Games in 2014. But those met with a mixed reception. Giant tapped the offshore syndicated loan market for a $850m five year borrowing that closed with a syndicate of 15 banks. Shanda Games was also planning a syndication for a loan of up to $850m for its take-private, but changes in the acquiring consortium led to that offshore financing being shelved.
Perfect World, like Giant and Shanda, generates most of its revenue in China. Overseas investors’ recourse to assets and cashflows would be limited, as they would be lending to a holdco company that owns the shares of the operating target but would have no cash flows of its own. A number of foreign banks were in talks with Shanda for its financing but those lenders lost interest after major international private equity investors exited and were replaced by Chinese investors in the buyout consortium.
Scource: Shanda, Global Capital – AsiaMoney
