China

Shanghai Fukong Interactive Entertainment Plans to Acquire Ningbo Baida Internet for RMB 1.37 Bln

Summary:

  • Shanghai Fukong Interactive Entertainment (600634.SS) has plans to acquire a 51% stake in Ningbo Baida Internet Co. for RMB 1.367 billion, according to Sina.
  • The shares of Shanghai Fukong Interactive Entertainment will continue to be halted from trading.

Why It Matters:

  • Ningbo Baida Internet Co. is a Chinese online gaming company which focuses on developing poker and gambling games. During the first three quarters of this year, the company posted revenue of RMB 125 million and RMB 93 million in net profit. Shanghai Fukong Interactive Entertainment plans to leverage the acquisition to expand its market share in the Chinese mobile gaming sector.
  • By the end of September, the book value of Ningbo Baidu Internet Co was RMB 78 million. The indicative valuation of the company is RMB 2.6 billion which is 33 times its book value. Ningbo Baida Internet Co. suggests that the goodwill of Shanghai Fukong, as well as Ningbo Baida’s patents for its games and an ultra high profit margin, provide the foundation for such a high valuation.
  • In order to protect investors’ interests, the target company has promised a minimum RMB 250 million net profit in 2018 and RMB 313 million in 2019.