Shanda Games To Buy Platform-related Affiliates

(RTTNews) - Chinese online-games provider Shanda Games Ltd. (GAME) has agreed to acquire two affiliates from its parent company Shanda Interactive Entertainment Ltd. for $811.5 million.

Shanghai Shengzhan Networking Technology Co. Ltd. and Tianjin Shengjing Trade Co. Ltd. are both entities under the common control of Shanda Interactive that provides user and payment platform services.

Shanda Games expects the acquisition improve its cost structure, improve its use of cash and eliminate recurring related-party transactions and settle related-party loans.

Shanda Games pays service fees to both companies for using their services. For the first quarter, service fees paid by Shanda Games to Shengzhan and Shengjing represented about 21.3 percent of its total revenues.

Shanda Games plans to pay the total consideration of $811.5 million in a combination of cash, deferred payments and settlement of an outstanding loan receivable from Shanda Interactive.

Shanda Games Chairman Tianqiao Chen said, "Through this transaction, the Board aims to strengthen Shanda Games both strategically and financially. The acquisition is a strong step forward in strengthening our mobile business, which now forms an integral part of our strategy."

"In addition, this transaction removes two cost components from our cost structure and is projected to improve our EPS by approximately 40-50 percent," Chen added.

The company expect to close the deal in the third quarter, subject to customary closing conditions.