China Mobile Games & Entertainment Group Ltd. is set to list in Shenzhen after the Nasdaq-traded company came under attack by short sellers in the U.S. and went private.
The Guangzhou-based mobile game developer and stakes in 5 other companies will be injected into Shenzhen-listed auto parts maker Zhejiang Century Huatong Group Co., according to a stock exchange statement. Century Huatong will raise 11 billion yuan via a private placement to help purchase the assets, which are worth a combined 13.5 billion yuan ($2.1 billion). Huatong’s current market capitalization is 13.65 billion yuan, based on data compiled by Bloomberg.
“The deal is certainly paving the way for CMGE to an A-share listing,” said Xue Yongfeng, analyst with Analysys International, said by phone today. “CMGE has better fundamentals than most other domestically listed peers, so valuations wouldn’t be low.”
Technology shares have risen 42 percent on the CSI 300 index this year, outperforming other sectors. That compares to a
7.9 percent gain by the Nasdaq Composite Index.
Affiliates of Orient Securities Co., Changjiang Securities Co. and Beijing HT Capital Investment Management Co. acquired CMGE in August for $352 million, data compiled by Bloomberg show. Earlier in the year CMGE defended itself from attacks by a short-seller which claimed it had inflated revenues.
The move is similar to that made by Focus Media Holding Ltd., which is seeking to relist in China after pulling its U.S.-listed American Depositary Receipts. Investors led by Carlyle Group LP bought out Focus Media for almost $4 billion in 2013 after Carson Block’s Muddy Waters LLC claimed the billboard operator exaggerated its network and overpaid for acquisitions.
U.S.-listed Chinese companies have fielded a flurry of buyout bids over the past two years as some companies sought to move their equity trading to China to cash in on higher price-to-earning multiples. That trend was stalled by a mid-year stock market rout in China that has since subsided.
— With assistance by Qi Ding, and Amanda Wang