ZQGame to Acquire Two Mobile Gaming Companies
National Business Daily, 8/14/13
Shenzhen-based online game developer and operator ZQGame (Zhongqingbao Interaction Network) (300052.SZ) announced today that it plans to invest RMB 357 mln and RMB 87.46 mln to purchase 51% stakes in two separate mobile gaming firms, Shanghai-based mobile game developer Morefun Digital Technology and Shenzhen-based mobile gaming company Small Technology, respectively. RMB 165 mln of the capital for the purchases will come from funds raised by the company's original IPO that were allocated for other projects.
In a two-step plan, ZQGame plans to eventually purchase a 100% stake in Morefun. The company will first purchase a 51% stake in Morefun for RMB 357 mln, and if Morefun net profit exceeds RMB 45 mln in 2013, ZQGame will purchase the remaining 49% in the company. Morefun is primarily involved in the development and operation of mobile games. In H1 2013, Morefun revenue was RMB 40.32 mln and net profit was RMB 10.55 mln. Earnings from Morefun's mobile online fantasy RPG Junwang 2 accounted for more than 60% of the company's revenue in H1 2013.
ZQGame also plans to purchase a 100% stake in Small Technology in two steps. The company will first purchase a 51% stake in Small Technology for RMB 87.46 mln, and if Small Technology's 2014 net profit exceeds RMB 40 mln, ZQGame will purchase the remaining 49% of the company no later than February 28, 2015. Internet and mobile services firm Tencent (0700.HK) holds a 13.5% stake in Small Technology. In 2013, Small Technology will release four mobile games and one browser-based game. The company's H1 2013 revenue was RMB 21.26 mln, and its net profit was RMB 14.77 mln.
ZQGame will use RMB 82.8 mln originally allocated for the construction of a Suzhou R&D center, RMB 20 mln allocated for the development of 2D MMORPG Xin Song Yan Yi, RMB 20 mln allocated for the development of 3D MMORPG Meng Jun, and RMB 20 mln allocated for the development of online casual game Xun Meng Yuan, together totaling RMB 142.8 mln, to pay for the first tranche of equity transfers in its purchase of a 51% stake in Morefun. ZQGame also plans to use RMB 21.87 mln in raised funds, originally allocated for the development of its Three Kingdoms-themed 2.5D MMORPG Sanguo Youxia, to pay for the first tranche of equity transfer in its purchase of a 51% stake in Small Technology.
The aforementioned projects were ZQGame's originally planned projects when it launched its IPO in 2010. The company planned to invest an average of RMB 46.39 mln - RMB 56.96 mln per game on game development, but presently has invested an average of less than 50% of this figure.
Keywords: Small Technology mobile gaming ZQGame wireless Tencent 0700.HK Xun Meng Yuan Xin Song Yan Yi Meng Jun 300052.SZ Sanguo Youxia Junwang 2 Morefun online gaming M&A
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