(Yicai Global) Sept. 10 -- Shares of Changyou, a leading developer and operator of online games in China, surged after compatriot internet giant Sohu tendered USD148.7 million in cash to make it a wholly owned private unit.
Beijing-based Sohu is offering USD5 for each Class A share and USD10 for each American depositary share that it does not already own, Changyou said in a statement yesterday. That is a 69 percent premium on Changyou's Sept. 6 closing price and 57 percent higher than the average over the past 30 days. Changyou [NASDAQ:CYOU] gained over 49 percent yesterday to close at USD8.84.
The move would make the Cayman Islands-based firm a privately held, wholly owned subsidiary of Sohu, which already holds all of the company's Class B shares. As a result, Changyou would need to delist from the Nasdaq.
Sohu has not given any reasons for wanting to take Changyou private, but it might be taking advantage of the low share price. The unit's market value is down 80 percent from a peak to USD315 million and its price-earnings ratio is just 3.77, according to its latest financial report.
One of China's internet pioneers, Sohu has in recent years fallen behind its peers. Chairman and Chief Executive Zhang Chaoyang has repeatedly said Wall Street seriously undervalues the firm. Its market capitalization is USD452.7 million. Sohu's share price [NASDAQ:SOHU] closed at USD11.54 yesterday, just a fraction of its former high of USD109.
Changyou had net profit of USD53 million on revenue of USD244 million in the first half, its earnings report showed. The firm had USD217 million in cash and USD1.66 billion of fixed assets.