Rumor: Perfect World Considers 'Going Private' Transaction
DoNews, 12/03/13
According to industry sources, Michael Chi, founder and CEO of Beijing-based online game developer and operator Perfect World (Nasdaq: PWRD), has been in contact with major investment banks regarding a transaction to take Perfect World private at a valuation of USD 1.2 bln. Perfect World's current valuation is around USD 920 mln, with a price-to-earnings ratio of less than 13.5.
According to the source, Perfect World's possible 'going private' transaction has three drivers:
1. The company's stock has faced long-term stagnation on the Nasdaq, despite announcing better than expected revenue and profits in Q3 2013.
2. China's gaming market is a cash cow, and Perfect World is not in need of capital. Other cash rich gaming companies such as Tencent (0700.HK) and Netease (Nasdaq: NTES) have used their excess funds to successfully incubate other businesses, which has inspired Perfect World to do the same. The company has successfully incubated and spun off Perfect World (Beijing) Pictures, and has high hopes for other affiliated businesses such as Beijing-based education software developer Human Education and Technology (Hongen Education Technology).
3. Perfect World has a low P/E ratio and market value as compared to gaming company Giant Interactive (NYSE: GA), which is also considering a 'going private' transaction.
An announcement regarding the transaction will reportedly be made prior to the Chinese New Year holiday at the end of January.
Keywords: financing Perfect World Michael Chi Internet online gaming Human Education and Technology delist
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