Update: Shanda-Ku6 Acquisition Rumor
DoNews, 11/26/09
Knowledgeable sources have revealed that Chinese online game developer and operator Shanda (Nasdaq: SNDA) will acquire 58% of Chinese video website Ku6 via a private offering of shares from Shanda subsidiary Hurray (Nasdaq: HRAY).
The agreement concluded by the two parties will involve Hurray first providing Shanda with USD 100 mln of stock in a private offering. Hurray's current market value is USD 113 mln. Shanda will transfer a portion of this stock to Ku6's shareholders at a predetermined valuation. After the transaction, Shanda will own 58% of Ku6, giving it a controlling share of the company. Ku6's investors will cash out their investments and withdraw from the company.
Industry sources say that Ku6's investors first sought out Hurray for possible cooperation in March 2009, and that they had talked with Shanda and other companies. In June, after Shanda acquired 51% of Hurray, all three parties began to discuss specifics. The conversation continued until an agreement was reached last week.
Shanda officials responsible for investments have confirmed that they have had extensive contact with a number of companies, including Ku6.
Editor's Note: According to reports by DoNews, an industry source has revealed that the private offering of shares from Hurray to Shanda will increase Shanda's stake in the subsidiary to 75%, diluting the stake held by Hurray's original shareholders by 50%, thereby removing the shareholders from the new company's executive management. The new company formed by the merger between Hurray and Ku6, which will continue to go by the name Hurray, will hold USD 160 mln in cash assets, have a market value of USD 254 mln, and have 42 mln shares. Ku6 chairman and CEO Kevin Li (Li Shanyou) will serve as management in the new company, although Li is reported to have signed a valuation adjustment mechanism agreement with Shanda that will allow him to leave if the company does not reach profitability within 2 years.
Both parties have confirmed the news with iFeng Finance. A mid-level employee at Ku6 reported that the company resolved in an internal meeting to significantly relax its budget constraints for 2010.
Keywords: Shanda Kevin Li Internet Ku6 SNDA Hurray HRAY online video online gaming M&A SP WVAS wireless
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