GigaMedia has entered into agreements to acquire majority ownership of T2CN Holding Limited, an online sports and casual game operator in China.
"T2CN is the number one online sports game portal in China, operating the market's most successful online sports game ever," stated GigaMedia CEO Arthur Wang. "T2CN provides GigaMedia with a tremendous platform in one of the most important markets in the world. We are very excited."
T2CN operates FreeStyle, one of the most popular online sports games in China. The acquisition is the latest step in GigaMedia's plan to build a dominant online entertainment platform in Asia and follows GigaMedia's recent strategic investment in Infocomm Asia Holdings, a Southeast Asian online game leader based in Singapore.
Under the terms of the transaction announced, GigaMedia will purchase up to 18.3 million shares of T2CN — equivalent to 40.3% of the outstanding common shares of T2CN — for a total consideration of US$22.9 million, subject to adjustment based upon T2CN financial performance in the first half of 2007.
Pursuant to GigaMedia's May 2006 initial investment into T2CN, GigaMedia also holds convertible preferred shares of T2CN which may be converted into an additional 15 million common shares of T2CN and an option to purchase an additional 4.3 million common shares of T2CN. Both are exercisable beginning in May 2007.
Upon conversion of all preferred shares and exercise of this option, GigaMedia's ownership stake in T2CN will be approximately 51.9 percent.
GigaMedia expects initially to equity account the acquisition of T2CN until such time as its common share ownership exceeds 50%. The transaction is expected to be accretive to GigaMedia's 2007 results. GigaMedia will make payment in two tranches: approximately half at closing and the remaining portion expected in August 2007. Payment consideration will include a small component of approximately 200,000 GigaMedia shares. These shares will be newly issued and contain a one-year restriction on transfer.