hongkong.com Corporation, a China mobile applications, online games and Internet services company, an 81%-owned subsidiary and a mobile and portal unit of chinadotcom corporation, recently announced it had signed a definitive agreement to make a strategic investment in a profitable Beijing-based online games company, Beijing 17game Network Technology Co. Ltd (17game).
The transaction is planned to enable hongkong.com to acquire a controlling position in 17game over time on an earn-out basis over the next two years, based on a single digit earnings multiple.
According to an investment bank's recent research, the China online games sector is expected to see revenue growth at a CAGR of 39% from 2003–2008, reaching US$1.5 billion annually by 2008 on the back of robust growth in personal computer and Internet usage. Today, it is estimated that online gaming in China is valued at US$150 million with 11 million annual subscribers.
17game has a track record in launching and distributing successful online games in the China market. Currently, 17game operates an online game which is considered to be one of the top 10 online games in the China market and with plans to add an additional online game to its portfolio. The new game is ranked within the Top 5 online games in the beta testing stage in the Korean online games market in terms of total aggregate play-time. 17game has a well-established distribution network across China for the games it licenses, including Internet cafes, software distributors, bookstores and department stores.
hongkong.com Corporation noted that although it has executed an initial investment agreement and expects to consummate the investment in the first half of 2004, additional related transaction documents and customary closing conditions do exist and there is no assurance that the transaction will be consummated. Closing conditions include further due diligence, board approval and the approval of the Growth Enterprise Market of the Stock Exchange of Hong Kong Limited.