China’s Sohu Seeks Games Consolidation With $500 Million Bid for Changyou

By Patrick Frater

LOS ANGELES (Variety.com) – Sohu, one of China’s Internet pioneers, is offering to buy out its games subsidiary Changyou in a deal that values Changyou at $532 million. Both companies currently have their shares listed on NASDAQ, but if the deal goes ahead Changyou would lose its separate stock listing.

, which has interests covering search, digital advertising and games, is offering $5 cash per A share, and $10 per ADS (which represents two A shares). That is some 69% ahead of the price of Changyou shares at the close of share trading on Friday, and pre-market indicators point to Changyou’s ADS leaping to over $9.

Having long ago been overtaken by Baidu, Alibaba and Tencent, Sohu has struggled. Profits have slipped for five consecutive quarters, and revenue in the last reported three-month period came in at only $475 million. In August, its shares hit their lowest valuation in 16 years.

Sohu did little to explain its non-binding take private offer. However, the move to absorb Changyou would appear to be driven by consolidation and cost-cutting potential, It may also be aiming to take advantage of weakness in the Changyou share price, which also hit an all-time low in August.

Changyou develops and operates a portfolio of PC and mobile games, such as “Tian Long Ba Bu,” one of the most popular PC games in . Changyou also owns and operates the 17173.com website, a Chinese-language game information portal.