CVC, iDreamSky Talks for Hong Kong’s Leyou Buyout Have Stalled
(Bloomberg) -- Talks between iDreamSky Technology Holdings Ltd. and CVC Capital Partners to jointly acquire a Hong Kong-listed gaming company have stalled as the Covid-19 pandemic roils financial markets, according to people familiar with the matter.
Although the suitors had lowered their offer for Leyou Technologies Holdings Ltd. in recent weeks, the coronavirus outbreak has affected negotiations between iDreamSky and CVC over valuations as well as due diligence, the people said. The new proposal valued Leyou at $1.23 billion, down from an initial $1.4 billion, said the people, who asked not to be identified as the discussions are private.
iDreamSky, which counts Tencent Holdings Ltd. among its investors, remains committed to the takeover and is seeking other co-investors to join the deal, the people said. As credit markets tighten, iDreamsky is turning to Chinese lenders for financing, the people said.
No final decision has been made and iDreamSky and CVC could still decide to go ahead with their planned deal, the people said. A representative for iDreamSky declined to comment, saying the company will provide the latest progress on stock exchange in a timely manner. A representative for CVC declined to comment, while a representative for Leyou didn’t immediately respond to requests seeking comment.
Shares of Leyou rose 1.4% in Hong Kong Wednesday, giving the gaming firm a valuation of about HK$6.7 billion ($871 million). iDreamSky fell 2%.
iDreamSky has been in talks with Leyou’s controlling shareholder Charles Yuk and other selling holders since late last year. CVC later joined iDreamSky in the takeover bid, Bloomberg News reported in February.
In the initial proposal, Shenzhen-based iDreamSky planned to hold a majority stake after it combined with Leyou, while CVC was set to hold a significant minority stake in the merged entity, the people familiar with the matter have said. The prospective buyers would retain Leyou’s biggest hits including free shooting game Warframe and would consider selling some of its games under development and physical studios to help fund the acquisition, the people said at that time.
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