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September 16, 2009

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Shanda Games eyes millions

SHANDA Games, a spin-off of China's biggest games firm, said it plans to raise up to US$788 million in an initial public offer next week on the American Nasdaq market.

After the September 25 share sale, parent Shanda Interactive Entertainment will concentrate on expanding its online music and literature businesses, analysts said.

The offering consists of 63 million US depositary shares (ADS), selling for between US$10.50 and US$12.50 each.

"We have not observed any other China Internet company that spun off a unit with such a high revenue contribution," Richard Ji, a Morgan Stanley's analyst, said in a note.

Shanda Games accounts for about 80 percent of the parent's revenue.

After the IPO, Shanda Interactive will hold a 78.1 percent stake in Shanda Games and hold 97 percent of shareholder voting power.

Shanda now operates 18 massive multiplayer online role-playing games and 11 casual games, including the popular title Aion.

In the first half, Shanda Games' net profit was 671 million yuan (US$98.6 million), nearly double a year earlier. Revenue in the period grew 43 percent to 2.19 billion yuan.

Shanda's IPO follows that of rival Inc, which spun off its game unit Ltd in April, raising about US$138 million.

In 2013, China's online game market revenue will reach US$5.8 billion, more than double last year, according to IDC, a US-based IT research firm.

Shanda Games will continue to develop because of the rapid-growing domestic games market in China, but it is expected to receive fewer resources from its current parent, analysts said.

Chen Tianqiao, Shanda's founder and chairman, is expected to focus on developing the company's online music and literature businesses, which may lead to a lower resource allocation to Shanda Games, according to Ji.

Chen has said several times that Shanda should be an entertainment platform or an "online Disney," going beyond just games.

Shanda Interactive is actively expanding music services after it acquired Hurray!, which owns controlling stakes in five domestic recording companies. Shanda's literature Website has been attracting 30 million readers a day and it's expanding to readers on mobile phones.



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