Sohu Announces it Will Take its Online Gaming Subsidiary Changyou Private; Both Stocks Soar

A few months after its proposal, Sohu secured a deal to acquire a full stake in Changyou for $579 million

Anthony Russo
    Jan 24, 2020 8:10 AM  PT
Sohu Announces it Will Take its Online Gaming Subsidiary Changyou Private;  Both Stocks Soar
author: Anthony Russo   

Sohu.com Ltd. (Nasdaq: SOHU) announced on Friday that it has entered an agreement to take its online games entity, Changyou.com Ltd. (Nasdaq: CYOU) private, sending both stocks higher. Under the agreement, Sohu would acquire a full stake that values Changyou's shares in the deal at approximately $579 million.

Sohu, which currently owns more than 90% of voting power in Changyou, said in a filing with the U.S. Securities Exchange Commission today that it will pay $10.80 for each American depositary share. That represents 82% of Changyou's closing price on Sept 6., marking the last trading day before Sohu made the proposal to take its subsidiary private.

In early trading on Friday, Changyou soared 8% to $10.72 per ADS, while Sohu rose 4% to $11.77 per ADS.

Under the original offer, Sohu proposed to acquire Changyou for $10 per ADS.

Based in Beijing, Sohu operates businesses in online media, video, search and gaming. In addition to Changyou, Sohu also controls the search engine Sogou Inc. (NYSE: SOGO)

In the three months through September Sohu said its revenue reached $482 million, up 9% year-over-year. Changyou reported its revenue in the third quarter was $111 million, representing a 9% increase from the same period in the previous year.

Serving as the financial advisor for Sohu on the deal is China Renaissance. The financial advisior for Chanyou is Houlihan Lokey (China) Ltd. 

Sohu said it intends to fund the merger with debt financing and expects the deal to close in second quarter.

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