Shi Yuzhu failed to unlock the "Playtika Chess Game"

Produced by Radar Finance and | Li Yihui, ed. | Deep Sea

On March 11, Giant Network ushered in a long-lost limit.

On the news side, on the evening of the 10th, the company announced that its shareholding subsidiary, Shanghai Jukun Network Technology Co., Ltd. (hereinafter referred to as "Jukun Network"), intends to sell the global casual social game giant Playtika Holding Corp. (hereinafter referred to as "Playtika") shares.

The company said that if the potential transaction is concluded, this move will increase a large amount of cash income for the company and help the company increase its layout and investment in cutting-edge innovation business.

In 2016, a consortium led by Shi Yuzhu, chairman of Giant Network, spent $4.4 billion to buy Alpha, Playtika's parent company. However, it was difficult to package Playtika's parent company Alpha into giant networks, because Playtika was "suspected of gambling" as a board game, resulting in four restructurings that ended in failure.

Some analysts believe that Shi Yuzhu chose to sell Playtika, presumably because of love and could not, can only choose to let go.

Transaction valuations have attracted much attention

As early as February 28, Playtika revealed a potential intention to sell.

At the time, Playtika's board revealed that it had begun evaluating the company's potential strategic options with a view to creating maximum value for its shareholders. As part of the process, the board has said it will review its "full strategic options," which could include the sale of the company.

Financial data released during the same period shows that in the fourth quarter of 2021, the company's revenue increased by 13.2% year-on-year to $649 million, and net income totaled $102 million for the same period, an increase of 34.6%. During this period, Playtika's casual game revenue increased 31.5% year-over-year, accounting for 51.8% of total revenue.

Based on the total in-app purchases of the iOS App Store and Google Play Store for the nine months ended September 30, 2020, the company's nine games rank among the top 100 highest-grossing mobile games in the United States.

For the full year 2021, Playtika achieved operating income of $2.583 billion, up 8.92% year-on-year, and net income attributable to common shareholders of the parent company of $308 million, an increase of 234.96% year-on-year.

This revenue data is far better than the giant network of A-share listings. According to the financial report, in the first three quarters of 2021, its revenue was 1.542 billion yuan, down 10.57% year-on-year, and the net profit attributable to the mother was 874 million yuan, up 4.38% year-on-year.

According to the announcement of Giant Network, the evaluation process of the potential transaction has been initiated, and Playtika Holding UK II Limited, indirectly controlled by Giant Network, as the controlling shareholder of Playtika, is one of the participants in the potential transaction.

If the potential transaction is completed and causes Jukun Network to sell all or part of its indirectly held shares in Playtika, it may have a material positive impact on the company's financial condition and operating results, and the actual impact will be subject to the conclusion of the company's subsequent audit report.

According to Dongcai Choice data, Playtika Holding UK II Limited currently holds 212 million shares of Playtika equity shares, accounting for 51.8% of the equity. As of the U.S. stock close on March 11, Playtika shares $16.37 and a market capitalization of $6.746 billion.

Based on this calculation, the corresponding interest in the 51.8% stake held by Playtika Holding UK II Limited is US$3,494 million.

But the benefits of the deal may not stop there. Not long ago, Zynga, a social gaming platform that closely resembles Playtika's main business, was announced by U.S. game developer Take-Two to buy for more than $12.7 billion, at a premium of 64%.

Public data shows that Playtika is better than Zynga in many business indicators, which has revenue of $2.8 billion in fiscal 2021, but a loss of net profit attributable to the parent of $104 million, an increase of 75.73% year-on-year.

The market expects that with Zynga's success story first, there is also the possibility of a large premium for Playtika, which is also scarce, and the valuation may not be lower than Zynga's transaction consideration.

Although not a consolidated asset, Playtika is vital to giant networks. The company has not had explosive game output for a long time, and its revenue has declined for three consecutive years, but it can still maintain profit growth, which is due to the investment income of the giant network.

After abandoning Playtika, Giant Network may bet on the popular meta-universe track. Shi Yuzhu has publicly expressed his concern for the metaverse, and said that the giants will actively participate in the development and layout of the metacosm.

On the interactive platform, Giant Network also said that it attaches great importance to the meta-universe trend and the opportunities it brings to the game industry, and determines the meta-universe game as one of the directions of long-term layout.

The pursuit of 6 years and 4 listings has not been successful

Founded in 2010 by Robert Antokol and Uri Shahak, Playtika is an Israeli-based company that uses artificial intelligence technology to transform games.

The company has a global original business model, acquiring game assets for transformation, continuously analyzing, understanding and learning users through big data, artificial intelligence and other technical means, and outputing a fine operation transformation plan for games to achieve substantial game growth.

Founder Robert, who worked at CMate and Oberon Media, is an industry veteran who founded Playtika after earning $1.5 million. Less than a year after its founding, the company was acquired by Caesars Interactive Entertainment for a whopping $160 million.

Caesars Interactive Entertainment in the United States is controlled by the las Vegas casino tycoon, limited by the difficulty of legalizing online gambling, it acquired the company that mainly plays chess and gambling mobile games.

After the acquisition, Playtika's slot game Slotomania, launched in 2011, has the same graphics, music, and gaming experience as the Las Vegas casino slot machine. In 2015, Slotomania contributed $358 million to Playtika, about half of the company's revenue that year.

In fact, Slotomania remains Platika's biggest cash cow and the world's most profitable social betting game. Sensor Tower store intelligence data shows that in the U.S. market in 2020, Slotomania ranked second with revenue of $303 million, and from September 2020 to August 2021, it ranked third in the U.S. market in terms of revenue.

Slotomania's ability to maintain its strong vitality stems from its social attributes outside of the game. In games, players can exchange gifts, help complete missions, and share rankings with others, all of which have proven successful in increasing game viscosity.

In addition, the company also has "WSOP", "House ofFun", "CaesarsSlots", "BingoBlitz" and other self-developed or acquired casual social board games.

Giant Network's entanglement with Playtika dates back 6 years.

In July 2016, after Caissa Group filed for bankruptcy protection due to high debt, Shi Yuzhu organized a Chinese consortium including Yunfeng Fund, Oceanwide Group, Minsheng Trust, Hony and CDH to buy Playtika's parent company, Alpha, for US$4.4 billion (about 30.5 billion yuan at the time).

In October 2016, Giant Network planned to incorporate 100% of Playtika into the listed company system by way of a non-public offering of shares and payment of cash. But the plan failed to pass the SFC's approval because Playtika's board game was controversial and "suspected gambling" could harm investors' interests.

Subsequently, in November 2018, Giant Network adjusted the restructuring plan to cancel the supporting funds raised, increase performance commitments, etc., and then the company withdrew the plan on July 17, 2019; in July 2019, Giant Network once again disclosed the restructuring plan for the cash acquisition of 42.30% of Alpha's equity, and then the company disclosed on November 4 that it decided to terminate the restructuring.

During the restructuring process, the Shenzhen Stock Exchange repeatedly inquired whether "Playtika is suspected of gambling behavior" and "whether Playtika's main games and operating models comply with the policies and regulations of the industry authorities in China on board and card online games." Some analysts believe that "suspected gambling" or one of the reasons for the failure of restructuring.

Playtika's restructuring has been dragging on for a long time, so that the capital tycoons who originally followed Shi Yuzhu could not be realized, and they felt suspicious of each other.

In September 2018, Shi Yuzhu appealed on Weibo, claiming that he had recently suffered personal safety threats and online rumor attacks. The outside world pointed out that It was Ningbo billionaire Yu Guoxiang and Shi Yuzhu who turned against each other and broke out into contradictions with each other. In addition, there are rumors that Shi Yuzhu was taken away by the police in Hangzhou, and this news caused a huge earthquake in the industry. Subsequently, the company debunked the rumors.

In January 2021, Playtika went public on the NASDAQ. However, even after completing the independent listing, Shi Yuzhu still refused to "give up".

On June 15, 2021, Giant Network disclosed the "Gift Agreement", and Giant Investment, controlled by the actual controller Shi Yuzhu, intends to donate to Giant Network 1.1% of the equity held by Giant Network free of charge. After the completion of the transaction, Giant Network and its wholly-owned subsidiary, Judao Network, together hold 50.1% of the equity of Jukun Network, which can transform Jukun Network from an associated company into a holding subsidiary of a listed company and achieve consolidation.

On June 16 and June 23, Giant Network received consecutive letters of concern requesting full clarification on whether Playtika, a core asset of Giant Network, was suspected of gambling.

Finally, on the evening of July 12, Giant Network announced that the donation was revoked by the decision of the affiliated shareholder Giant Investment, on the grounds that "the specific matters involved in the content of the Donation Agreement are more complicated".

Analysts believe that the red line of A-share market assets is not to be involved in gambling, and on this issue, Giant Network has never been able to come up with convincing evidence.

Shi Yuzhu's equity has been frozen for a series of times

Before the sale of Playtika, Shi Yuzhu's recent attention was when his shares in his name were frozen one after another.

According to Tianyan' investigation, from August 19 to 25, 2021, the Beijing Financial Court has frozen Shi Yuzhu's current shareholding in five companies, Named Zhuhai Giant High-Tech Group Co., Ltd., Zhuhai Gentleman New Technology Co., Ltd., Hangzhou Yunxi Investment Partnership, Giant Investment Co., Ltd. and Ningxia Giant Venture Capital Co., Ltd.

The total amount of the above equity is about 199 million yuan, and the freezing period is 3 years.

At that time, the public relations department of Giant Network came forward to respond that many years ago, Shi Yuzhu made a personal guarantee for a business of the plaintiff party out of help, and the relevant party issued a disclaimer counter-guarantee to Shi Yuzhu. Due to the impact of the subsequent business development, the company launched a civil lawsuit against Shi Yuzhu according to the process; after preliminary communication, the other party promised to coordinate the withdrawal of the lawsuit as soon as possible.

The party, Shi Yuzhu, also left a sentence on Weibo, "Help friends, help life more, help cause less", alluding to helping friends' careers is dragged down.

After four months, from December 23, 2021, Shi Yuzhu's equity of about 198 million yuan was frozen again, including the equity of Giant Investment Co., Ltd., Hangzhou Yunxi Investment Partnership (Limited Partnership), Zhuhai Giant High-Tech Group Co., Ltd., and Zhuhai Gentleman New Technology Co., Ltd., with a freezing period of 3 years.

For the equity to be frozen again, neither the listed company nor Shi Yuzhu himself responded. While the Giants are vague, some rumors suggest that the freeze may be related to the Playtika acquisition.

Shen Meng, executive director of Chanson Capital, believes that if Playtika's acquisition fails, many investors may require Shi Yuzhu or Giant Network to repay the relevant assets, resulting in Shi Yuzhu's equity being frozen one after another.

Some industry insiders believe that shi Yuzhu's choice to sell Playtika at present may mean that he has finally made up his mind to give up this "hot potato" and travel lightly towards the metaverse in his mind.

Note: This article is the original of Radar Finance (ID: leidacj). Unauthorized reproduction is prohibited.