- Company said to consider U.S. IPO or sale of news business
- Owner of China’s second largest portal said to look for buyer
Netease Inc. is seeking to raise about $300 million by spinning off its news operations to focus on its core business of online gaming, according to people familiar with the matter.
The money could be raised through a U.S. initial public offering though the company may also consider a sale of the business, the people said, asking not to be identified because the plans are private. A spinoff is now at the planning stage and the company is exploring talks with potential buyers, the people said. A Netease spokeswoman said the company had no immediate comment.
Its shares rose as much as 4.5 percent in early U.S. trade and ended at a record high of $231.27.
Netease has used a mixture of lifestyle, entertainment and business news to create China’s second-largest online destination with more than 10.3 billion page views in July, lagging only Tencent Holdings Ltd. The Hangzhou-based company, best known for bringing game titles like Overwatch and Westward Journey to local players, is among the largest of a crop of domestic operators that have benefited alongside a swelling local online and mobile population.
Like Tencent, it’s now tailoring its operations for a growing smartphone audience while targeting user preferences to generate more advertising revenue. It’s tried to expand its mobile news app and live-streaming service, while starting the Netease Media Platform to carry high-quality content with greater appeal to advertisers.
But like its peers, Netease has had to grapple with an increasingly uncertain regulatory environment and a government that’s grown wary of news reporting. Gaming remains by far its largest business: the company almost doubled its revenue to $1.4 billion in the second quarter, with about three-quarters of that generated from online games. It has about a 12 percent share of the market by revenue, according to data compiled by Bloomberg.
A Netease spinoff would come during a drought for U.S. tech debuts. This year has been the slowest for U.S. technology and communications IPOs since the recession, according to data compiled by Bloomberg. The biggest debut of 2016 so far has come from Japan’s Line Corp., which raised $1.3 billion to bankroll an Asian business expansion. Other startups have put off going public for fear of earning a lower valuation than last achieved in private fundraising.