PE bidders back out of $1.9bn China deal

Carlyle, FountainVest and Primavera have withdrawn from the take-private of US-listed Shanda Games

The Carlyle Group, FountainVest Partners and Primavera Capital have all said they will not participate in the management-led buyout of US-listed Chinese gaming company Shanda Games, according to a statement.

The consortium, which originally included Primavera, proposed to acquire Shanda Games $3.45 per class A or class B ordinary share, or $6.90 per American depositary share, in January this year, with Carlyle and FountainVest joining the group in May and April respectively.

The deal is still on-going, with Orient Securities, Haitong Securities and Ningxia Zhongyincashmere International joining the bid, which is expected to be as much as $1.9 billion.

It is unclear exactly why the private equity firms backed out of the offer, having been involved in similar transactions before, Carlyle and FountainVest having led the $3.7 billion US take-private of Chinese digital advertising agency Focus Media in 2013. 

The firms were unavailable for comment before press time. 

Shanda Games listed in the U.S. in September 2009 with an initial public offering price of $12.50 a share.

Its rival, Giant Interactive received a similar investment earlier this year when Baring Private Equity Asia and Hony Capital teamed with management to buyout the online game developer in a $2.8 billion deal.

Baring and founder Yuzhu Shi had previously offered $11.75 per share representing a total deal value of $2.8 billion, but later increased the offer and brought in Hony Capital as a co-investor.

The deal was the largest take-private of a US-listed Chinese company completed since the Focus Media transaction, firms turning to the US market increasingly as China-focused GPs struggle to deploy capital at home.