Looking back in 2014, it was hardly to notice Century Huatong (002602), a third-tier city located in Shaoxing, in the internet-hood occupied by the first-tier cities. To the outside observers, it is just some kind of juvenile rhetoric like the saying, “they who know nothing fear nothing”, when Century Huatong claims to become the leading Internet Company in China. During the past 4 years, various kinds of regulatory policies have been released, the return of CCS (Chinese Concept Shares) has been restrained, the stock market has crashed and the circuit-breaker was activated several times, but the Century Huatong Group entered the almost wrapped up Internet market step by step with a firm belief.
It was fortunate for the Century Huatong Group, which started its business with automotive parts and components, to have such a similar and even stronger partner – the V-capital, when he was in faced of too many unknowns and uncertainties in the Internet industry and capital markets.
The V-capital is a financial platform wholly-owned by Huaxi Holding. When it was established in August 2015, it invited Liu Jing’s team to join in. Liu Jing’s team once led the privatization of Shanda Games. This time, under the company’s strategic positioning, aiming to provide the service for the transformation and upgrading of listed companies, Liu Jing established the TMT M&A team and took the post of the managing director of the company.
At that time, the Century Huatong Group had already proposed the transition for one year, during which the T2 Entertainment and the 7 Cool were acquired. However, it was reported bluntly by some media that the T2 Entertainment does not have much prospects for its development, and meanwhile, the 7 Cool was caught in a lawsuit, thus the Century Huatong Group has got into a quite embarrassed situation.
In August 2015, the V-Capital sensitively noticed the potential value of the phenomenon of “Going to the Sea” and it started to acquire the overseas game company --DianDian Interactive (Funplus), and this intention coincided with the idea of the Century Huatong Group.
Through the mainstream strategy games in Europe and America such as “King of Avalon”, the DianDian Interactive has successfully bring the European and American cultures to the global market and has achieved remarkable results. The Century Huatong Group also wants to further promote the Chinese cultural industry into overseas markets through the DianDian Interactive. The quite predictable investment of the V-Capital in the DianDian Interactive has provided a good direction for the Century Huatong Group’s merger and acquisition. Moreover, as an emerging institution, the V-capital completed a multibillion yuan acquisition successfully during the stock market crash period, and this made the Century Huatong Group be greatly impressed by its great capabilities.
The common strategy brought the V-Capital and the Century Huatong Group together. On November 30th, 2015, the Century Huatong Grouop issued a preplan announcement that it intended to acquire a stake of 100% in CMGE, Jingye International, Huacong International, Huayu International, and DianDian Interactive, and a stake of 40% in Cayman. On December 1st of the same year, the Century Huatong Group issued an asset announcement that it would purchase the entire equity of CMGE, DianDian Cayman, and Diandian Beijing by issuing shares plus paying cash. The total transaction price was approximately RMB 13.476 billion.
Transition is a cruel game. On May 11, 2016, a piece of news shocked the financial community that the China Securities Regulatory Commission decided to strengthen the supervision of the cross-border mergers and acquisitions of listed companies, especially the games, movies, and the restraint of the return of CCS (Chinese Concept Shares). There are endless speculations about whether CMGE will have a backdoor listing or not. At this time, the V-Capital firmly stood on the side of the Century Huatong Group and together they flew to Beijing and communicated with the target company again and again. They talked to the regulators and discussed the prospects and plans with the shareholders all night long, and finally they dispelled the doubts and hesitation of all the parties.
In September 2016, the Century Huatong Group adjusted the reorganization plan and announced that they would suspend the acquisition for CMGE and focus on DianDian Beijing and DianDian Cayman, and the transaction price would be reduced to less than 7 billion yuan from the previous 13.5 billion yuan.
“In the financial market, the results are more important. Every step of your decision must be guaranteed to increase the probability of success.” said Liu Jing, managing director of the V-Capital and head of the TMT M&A team.
There was obviously more than one obstacle in front of the Century Huatong Group and the V-Capital. In November 2016, foreign exchange control and the injustice of the stock market led to difficulties in raising funds, even someone yelled the lament “the game industry is a dead end”. However, at this time, the V-Capital was much more confident, and instead of following others blindly, the V-capital showed its great concentration and judgment. Liu Jing's team continued to demonstrate a strong ability of solving professional problems while the V-Capital completed the fund-raising soon with its full action.
After experiencing ups and downs together, the Century Huatong Group and the V-Capital will finally usher in a harvest season. On January 31st, 2018, at the investor exchange meeting held in Shanghai, the Century Huatong Group announced that it had completed the transaction of 100% equity of DianDian Interactive at the price of 6.9 billion yuan. As an important part of the overseas strategy of the Century Huatong Group’s game industry, the revenue and profit of DianDian Interactive in 2018 are also consolidated with the Century Huatong Group.
What is more exciting for market participants is that at the end of the meeting, the Century Huatong Group promised to choose a good opportunity to inject Shanda Games assets. To the Century Huatong Group, this would be another dream-chasing story, in which the V-Capital would certainly play an important role.
