Deals

Shanda tidies up online service costs for longterm mobile success with $811.5 million deal

Buys two companies from parent to reduce costs

Shanda tidies up online service costs for longterm mobile success with $811.5 million deal
|

Chinese games publisher Shanda Games (NASDAQ: GAME) has tidied up its internal arrangements to better prepare itself for mobile games growth

It's paid its parent Shanda Interactive Entertainment $811.5 million to acquire the two affiliate companies that provide its user and payment platform services.

The deal is payable in a combination of cash, deferred payments and settlement of an outstanding loan receivable from Shanda Interactive.

Helping hands

Previously Shanda Games had paid the two companies - Shanghai Shengzhan Networking Technology Co. and Tianjin Shengjing Trade Co. - around 20 percent of its quarterly sales.

For example, it paid 21.3 percent of its Q1 2013 sales to the companies.

Shengzhan owns the Shanda Pass database which contains account information, such as registration, payment and other user-behaviour data.

Its customer service team also handles approximately nine million interactions with game users on average per month.

Future focus

Shanda Games says that the deal will improve is cost structure as it switches to mobile games, and hence over-time its earnings per share by as much as 50 percent.

"The acquisition is a strong step forward in strengthening our mobile business, which now forms an integral part of our strategy," said chairman Tianqiao Chen.

"For mobile games, platforms play a more important role than each individual game as mobile games tend to be smaller in scale and with shorter lifecycle than [massively multiplayer online] games.

The transaction is expected to close in the third quarter of 2013.

Shanda Games had cash, cash equivalents, short-term investments etc of $556 million on March 31, 2013.

[source: Shanda Games IR]