Shanda Carlye

Carlyle pulls out of $1.9b Shanda take private

The private equity firm backs out of deal to take US-listed Shanda Games private for $1.9 billion. The news comes as investors push back on leverage loan pricing.

Private equity firms Carlyle, Primavera and Fountainvest have pulled out of taking Nasdaq-listed Shanda Games private for $1.9 billion, the online gaming company said Wednesday.

Perfect World, a Chinese online gaming peer, also dropped out of the deal, according to the statement. It is selling all of its 30.3 million shares to an affiliate of Chinese broker Orient Securities for $104.6 million in cash.

Stepping up to take their place in the take-private deal are Chinese companies Orient Securities, Haitong Securities and Ningxia Zhongyin Cashmere International.

Mainland China-based Shanda Games did not give a reason for the change in consortium members. The news comes as private equity sources say it has become harder for funds to gather leveraged loans for buyouts.

US institutional investors have pushed back on pricing of high-yield loans sold by Asian companies of late, partly due to rising geopolitical risks. Investor sentiment took a beating during early August as Russia amassed troops on Ukraine’s border and European woes came to the fore, with Italy slipping back into a recession and Portugal bailing out one of its banks.

According to EPFR Global, which tracks fund flows, redemptions from high-yield and floating-rate funds hit record levels in early August. Investors pulled out more than $8 billion from US high-yield funds, while floating-rate bond funds experienced record-setting outflows after US Federal Reserve chairman Janet Yellen said in July that valuations of high yield bonds and leveraged loans appeared stretched.

Another online gaming deal, Giant Interactive's $850 million buyout loan, which financed a take-private bid by a consortium of investors including Giant Interactive chairman Yuzhu Shi, Baring Private Equity Asia and Hony Capital, struggled towards the end of syndication according to loan market sources.

Chinese packaging company HCP, held by private equity firm TPG pulled its $380 million covenant-lite loan that targeted US institutional investors.

Carlyle joined the bidding consortium in May, according to Shanda's website. The private equity players had agreed to invest alongside Shanda Games’ controlling shareholders to take the firm private. Shanda Interactive owns 65% of Shanda Games. 

FinanceAsia reported earlier this month that general syndication of the buyout loan to support the take private deal had been delayed.

Shanda Games said on Wednesday that the terms of the take-private proposal are unchanged. The consortium still wants to acquire Shanda Games for US$3.45 per class A or class B ordinary share of Shanda Games, or US$6.90 per ADS. 

One of Shanda Games’ independent directors, Andy Lin, is affiliated with Orient. 

Shanda provides a diverse portfolio of online games and interactive entertainment, including massively multi-player online role playing games (MMORPGs), casual online games, network PC games, cartoon, literary and music content. Shanda listed in 2009.

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