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TheStreet Open House

Gilman Law, LLP Is Investigating Shanda Games Limited Due To Its Decision To Spend US$811.5 Million To Acquire Affiliates From Its Parent Company

Securities Attorneys at Gilman Law, LLP are investigating a recent acquisition announcement by Shanda Games Limited (NASDAQ:GAME)("Shanda Games" or "Company"). The Company announced that it will acquire the following affiliates from its parent company, Shanda Interactive Entertainment Limited – Shanghai Shengzhan Networking Technology Co., Ltd. ("Shengzhan") and Tianjin Shengjing Trade Co., Ltd. ("Shengjing"). Both Shengzhan and Shengjing are under the common control of the parent company, along with Shanda Games.

(Company press release: http://ir.shandagames.com/releasedetail.cfm?ReleaseID=780743)

Shengzhan owns the Shanda Pass database, which contains account information for gamers that is used to access games operated by Shanda Games, and maintains a customer service team. Shengjing owns approximately 180,000 prepaid card distribution channels. The "special committee" formed to evaluate the acquisition transaction was advised by an outside law firm and accounting firm. Shanda Games' board of directors, acting upon the unanimous recommendation of the special committee, approved the transaction.

(Company press release: http://ir.shandagames.com/releasedetail.cfm?ReleaseID=780743)

The acquisitions were announced on Sunday, July 28, 2013, and are slated to close in the third quarter of 2013 for US$811.5 million (subject to customary closing conditions and adjustments). Shanda Games alleges that buying the affiliates will help it deliver the type of integrated platform it considers crucial for mobile success.

(Company press release: http://ir.shandagames.com/releasedetail.cfm?ReleaseID=780743)

Is the Acquisition Best for Shanda Games and Its Shareholders?

On July 29, 2013, the day after Shanda Games announced the transaction, Company shares had fallen 21.4%, which significantly impacted the Company's share price, which had previously doubled since early May 2013. Since the announcement on July 28, the Company's shares have plummeted 37%. This share price plunge could be due to a variety of factors, such as the market seeing the deal as a poorly-priced transaction, or viewing it as evidence of the risks posed by Shanda Games' unique and not-so-independent ownership structure to shareholder interests.

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