Bottom line: An unexpected mid-sized transaction between Baidu and Perfect World could indicate the former is preparing to buy the latter, with an aim to building up a major new player in the online gaming and literature spaces.
Baidu eyeing Perfect World?
Leading search engine Baidu(Nasdaq: BIDU) has reportedly just sold its online literature unit to the recently privatized Perfect World, in a rare reversal for China’s big Internet companies that have been far more active as buyers over the last 3 years. The deal is relatively small, with a reported sale price of 1.2 billion yuan, or about $190 million.
Media are focusing on the fact that Baidu paid far less when it bought the literature unit for a reported 190 million yuan from the same Perfect World just 2 years ago, meaning Baidu earned quite a nice profit on the investment. But more intriguing is the possibility that this move could presage an acquisition of Perfect World by Baidu, which looks quite logical for a number of reasons I’ll describe shortly. Read Full Post…
The following press releases and media reports about Chinese companies were carried on November 12. To view a full article or story, click on the link next to the headline.
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Alibaba (NYSE: BABA) Generated $14.3 Bln GMV on Global Shopping Festival (Businesswire)
Perfect World to Reaquire Online Literature Unit from Baidu (Nasdaq: BIDU) – Source (Chinese article)
Bottom line: Shanda Games’ imminent de-listing could be followed by a behind-the-scenes consolidation by one or more savvy private equity firms to create a major new online game firm capable of challenging NetEase or even Tencent.
Shanda Games heads for de-listing door
Faded online gaming pioneer Shanda Games (Nasdaq: GAME) is finally heading for greener pastures, releasing what’s likely to be its final earnings report as its shareholders get set to vote on a plan to privatize the company. Shanda Games’ road to privatization has been long and tortured, and is only now finally coming to completion after its initial announcement nearly 2 years ago. (previous post) But that said, I do have to commend Shanda’s strong-willed founder and chief Chen Tianqiao for finally getting the job done.
From a broader perspective, Shanda’s departure continues a trend that has seen online game companies de-listing en mass, after their stocks struggled for years due to stiff competition. In an interesting twist to that trend, these gaming laggards have been one of the few groups to actually complete privatizations among the 3 dozen US-traded Chinese companies that announced such buyouts earlier this year. Read Full Post…
Bottom line: JD.com’s new share repurchase program looks like a good use of cash due to likelihood of a rebound for its stock, while its tie-up with a top Korean peer also looks like a good way to target Chinese consumers who like imported goods.
JD launches share buy-back
After amassing huge quantities of cash through a series of IPOs and other fund-raising activities, Chinese Internet companies are rapidly discovering a new use for those idle funds by buying back their own stock. The latest such move has JD.com (Nasdaq: JD), the nation’s second largest e-commerce company, announcing a new plan to buy back up to $1 billion worth of its shares, on the belief they have become undervalued in a recent sell-off.
JD was also in the headlines for another new tie-up with a major Korean retailer, announcing the opening of a flagship store to offer imported goods from South Korean e-commerce giant Lotte.com. This particular move is part of an ongoing drive by Chinese e-commerce firms to offer more imported goods to local consumers who are often wary of domestic products that are fakes and suffer from poor quality. Rival Alibaba (NYSE: BABA) has embarked on a similar drive, announcing its own new tie-up with Germany’s Metro Group the same day as the JD announcement. (company announcement) Read Full Post…
Bottom line: Alibaba’s new tie-up with a leading US wine maker is mostly symbolic and represents a boom in the e-commerce market for imported goods, while NetEase’s new share buyback plan is unlikely to provide much support for its sagging stock.
Robert Mondavi launches on Tmall
Leading Chinese Internet companies Alibaba (NYSE: BABA) and NetEase (Nasdaq: NTES) are trying different approaches to boost their sagging stocks, amid a broader sell-off for US-listed Chinese companies in tandem with China’s own tanking markets. The first case has e-commerce leader Alibaba launching a new online wine shop with US giant Robert Mondavi, as part of a broader move to let Chinese consumers buy imported goods online. The move by online game giant NetEase looks a bit more conventional, with its announcement of a plan to buy back up to $500 million of its stock.
Alibaba and NetEase certainly aren’t alone in watching their shares tumble, amid a broader sell-off for US-listed Chinese stocks over the last 2 months. Alibaba shares have lost nearly half of their value from their all-time high reached last November, and now trade about 5 percent below their IPO price from a year ago. NetEase shares have lost a quarter of their value since early August, in a plunge coinciding with China’s own tumbling stock markets. Read Full Post…
The following press releases and media reports about Chinese companies were carried on September 2. To view a full article or story, click on the link next to the headline.
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NetEase’s (Nasdaq: NTES) Board Approves $500 Mln Share Repurchase Program (PRNewswire)
Phoenix New Media (NYSE: FENG) to Cut Staff, Retrench – Memo (Chinese article)
Alibaba (NYSE: BABA) Launches “Tmall Vineyard Direct” With Robert Mondavi Wines (Businesswire)
AsiaInfo to Acquire Trend Micro Chinese Subsidiary (Businesswire)
Bottom line: China’s gaming market remains stubbornly fragmented and unprofitable despite its huge potential, with no clear signs of much-needed consolidation coming anytime soon.
Gamers continue to struggle
As much of China bakes under a summer heatwave, a major trade show this week in Shanghai is casting a different spotlight on the overheated state of the nation’s gaming industry. One report is saying that only 2 percent of companies in the emerging mobile gaming space can generate big profits, and the situation may not improve anytime soon due to a stubborn state of fragmentation.
The problem has led many of China’s US-listed gaming companies to launch privatization drives over the last 2 years, including Giant Interactive, a large but decidedly second-tier player that de-listed a year ago. Giant’s talkative chief Shi Yuzhu is blaming US investors for failing to appreciate his company, with the latest reports saying he thinks Chinese stock buyers will value his firm at more than 5 times what it was worth when it de-listed from New York. Read Full Post…
Bottom line: Chinese companies should follow the lead of Huawei, Baidu and Tencent in fighting internal corruption, but Beijing should also play a role by ensuring such probes don’t become a weapon for companies to attack each other.
Tencent corruption probe nets former video exec
The growing clampdown on corruption at private Chinese companies was in the headlines last week, when Internet giant Tencent (HKEx: 700) disclosed that it was investigating half a dozen employees suspected of accepting bribes. But unlike other similar probes that have been growing in number over the last year, this particular one involved former Tencent employees, including one now working as a top executive for Internet rival Alibaba (NSYE: BABA).
Such corruption and other economic crimes have no place in a healthy corporate landscape, and leading Chinese high-tech names like Huawei, Baidu (Nasdaq: BIDU) and now Tencent should be commended for their efforts to stamp out the problem. But Tencent’s targeting of a high-level employee who went to work for a rival is also slightly troublesome, as it shows that companies could use such probes as a weapon to punish workers who defect to their competitors. Read Full Post…
Bottom line: The detention on suspicion of corruption of a former Tencent executive now working at Alibaba shows that Chinese Internet companies could use such internal probes to disrupt business at their rivals.
Former Tencent worker detained for corruption
Chinese tech companies are getting increasingly aggressive in their campaign to root out internal corruption, with word that Tencent (HKEx: 700) is probing current and former employees from its video unit for accepting bribes. But what’s most interesting about this latest anti-corruption drive is that one of the executives detained by police now works at the entertainment unit of Tencent rival Alibaba (NYSE: BABA). That element of the case reflects the fact that executives at China’s leading Internet companies often move between each other, in a job-hopping phenomenon that is relatively common in China.
But the move also reveals a potentially potent weapon that companies like Tencent could use in the future to try and disrupt business at their rivals. We saw a similar case just last year, when online game giant NetEase (Nasdaq: NTES) made allegations against one of its former employees who left to start social networking app Momo (Nasdaq: MOMO), causing major headaches for Momo on the eve of its New York IPO. Read Full Post…
Bottom line: China Mobile Games could be combined with Shanda Games if buyouts for the 2 companies succeed, followed by a re-listing in China that could gain strong interest from local investors.
China Mobile Games joins de-listing queue
The latest news that China Mobile Games (Nasdaq: CMGE) has received a buyout offer won’t surprise anyone, as it becomes the latest New York-listed Chinese Internet firm to receive such a bid due to its low valuation. What does come as a slight surprise is investor reaction to the bid, which saw China Mobile Games’ share price drop to well below the offer price. The could reflect some skepticism about the quality of this particular bid, which is coming from a Chinese securities brokerage.
This deal marks the latest in a long string of similar buyouts for US-listed Chinese firms whose shares have often languished in New York due to lack of interest from western investors who are unfamiliar with these names. Many of the companies are eying quick re-listings in their home China market, where they believe they can get valuations that are as much as double what they were worth in New York. Read Full Post…
Bottom line: Sina stands a 50-50 chance of getting a takeover bid within the next year, as suitors eye it for its low valuation, well-respected name and controlling stake of Weibo.
Sina anticipating suitor?
Leading web portal Sina (Nasdaq: SINA) has become one of China’s perennial Internet underperformers, leading to occasional talk that it might become a takeover target for a larger, better-run peer. Now Sina has just announced its renewal of a “poison pill” plan designed to prevent such a hostile takeover. This particular move looks like a formality rather than indicator of a looming takeover bid, since Sina launched the original plan 10 years ago and perhaps it is now is now set to expire. But the fact that Sina is not only renewing the plan, but doing so in a very public way, indicates it may feel it could become a takeover target in the current hot climate for Chinese Internet M&A. Read Full Post…
