Chinese entertainment media company, Shanda Interactive Entertainment Ltd. (SNDA), said Tuesday it has agreed to be taken private by a buyer group led by its chairman and chief executive Tianqiao Chen for $2.3 billion.
The company said it has entered into an agreement with Premium Lead Company Ltd. and New Era Investment Holding Ltd., pursuant to which Premium will acquire Shanda for $20.675 per ordinary share or $41.35 per American depositary share - each representing two ordinary shares.
The offer price represents a 26.6 percent premium over Shanda's 30 trading day volume-weighted average price as quoted by Nasdaq on October 14, the last trading day prior to the company's announcement on October 17 that it had received the "going private" proposal.
The buyer group, which engaged J.P. Morgan as its financial advisor and Shearman & Sterling LLP as its legal counsel in connection with the proposed transaction, said at that time, that it had received a "highly confident" letter from J.P. Morgan about financing the proposed transaction.
Premium Lead Company is a British Virgin Islands business company jointly owned by Tianqiao Chen, his wife Qian Qian Chrissy Luo, who is a non-executive director of Shanda, and his brother Danian Chen, who is the chief operating officer and a director of Shanda.
The buyer group collectively beneficially owns about 69.7 percent of the company's outstanding shares and intends to fund the transaction through a combination of proceeds from a loan facility in the amount of $180 million from JPMorgan Chase Bank, N.A., cash in the company and its subsidiaries, and a cash contribution from the buyer group.
The transaction, which is expected to close before the end of the first quarter 2012, is subject to the approval by an affirmative vote of shareholders representing two-thirds or more of the company's ordinary shares.
At the effective time of the merger, New Era Investment Holding will be merged into Shanda Interactive, and Shanda Interactive will become a wholly-owned subsidiary of Premium. On completion of the transaction, Shanda Interactive will become a privately-held company and its ADS will no longer be listed on the Nasdaq.
In 2009, Shanda Interactive spun off its core games business, Shanda Games Ltd. (GAME), through an IPO. Ever since, the company has been struggling as its non-game units continued to deliver weak results.
In late August, Shanda Interactive reported a 95 percent plunge in profit for the second quarter as lower margins and higher operating expenses offset strong revenue growth. The company is scheduled to report its financial results for the third quarter on December 1.
SNDA closed Monday's trading at $39.39, down $0.01 on a volume of 252,700 shares.
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