What happened
Ourgame announced on November 26 that Beijing Irena Culturewill acquire 28.77% of Ourgame’s equity for HK$1.38bn: 23.78%transferred from several existing large shareholders and 4.99%from Kongzhong Corporation (KZ.US). The aggregatetransferring shares are 226mn at HK$6.1 per share.
Comments
Shares will be transferred from current shareholderswithout issuing new capital. Management and businessoperation of Ourgame will remain intact. The implied acquisitioncost is ~HK$6.1 per share. The last close price of Ourgame isHK$5.47, representing a 12% premium. The deal shows Irena’sconfidence in Ourgame’s future development.This is expected to be a win-win deal for Ourgame andIrena as they have lots of potential synergies insports-related services. Ourgame is transforming to a globalsports company. It has started many O2O initiates, hostingvarious offline games such as WPT tournament in Sanya. In themeantime, Irena has rich expertise and capability in offlinesports event promotion as well as sports arena operation. Thedeal is beneficial to both parties as they can combine their onlineand offline resources. The synergies could accelerate Ourgame’sO2O strategies. For example, Ourgame opened its first WanyuE-Sports Arena in Beijing Workers' Stadium, while Irena happensto operate the stadium. We expect the two parties will have morecooperation in the future and thus improve their competitiveadvantage: 1) higher utilization rate of sports arenas; 2) betterways to monetize the online traffic in offline scenarios.
We expect more domestic companies to invest inH-share sports names like the Irena and Ourgame case. Werecommend watching investment opportunities in sports-relatedcompanies, such as Wisdom (1661.HK), Ourgame (6899.HK) andCentury Sage (1450.HK).