Shanda Games: A Buyout of a Chinese Family Firm
(7 pages of text)
A controlling shareholder of the NYSE-listed Chinese online gaming company Shanda Games has offered a buyout at USD6.90 per American Depository Share (ADS); each ADS consists of two ordinary shares. The offer provides a premium of 22 per cent to the stock’s Friday close. Throughout the previous year, Shanda Games’ ADS had typically traded in the range of USD2.74 to 6.45.
As Shanda Games’ independent directors attempt to evaluate the offer, they wonder: Should the shareholders accept it as it is? Should they ask for a higher price? Or should they look for the alternatives?
This case is designed for an MBA or advanced undergraduate course in corporate finance on the topic of “going private” through a management/leveraged buyout, especially in the situation with a controlling shareholder family. The case also allows discussion of emerging markets — in particular, China — and of the differences in the gaming industry between China and the United States. Alternatively, the case could be used in a module on valuation or corporate strategy.
Information, Media & Telecommunications
China/United States, Large, 2014
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