Behind the end of the privatization of the Perfect World: E-sports is working hard, Fosun has withdrawn

Therefore, the capital injection of Perfect World into the assets of the listed company Perfect Global did not lead to a change in the company's control, so there was no backdoor listing.

The boots hanging over the heads of Perfect Global investors finally landed.

On January 7, Perfect Global, which had suspended trading for more than half a year, finally unveiled its asset restructuring plan. The company plans to issue 614 million shares at a price of 19.53 yuan per share at a price of 12 billion yuan to acquire 100% equity of Shanghai Perfect World Network Technology Co., Ltd.(hereinafter referred to as "Shanghai Perfect"). After the transaction is completed, Perfect World Digital Technology Co., Ltd.(hereinafter referred to as "Perfect Digital Technology") will become the controlling shareholder of the company, and the shareholding ratio of Perfect World's actual controller Chi Yufeng will increase to 57.77%.

In this 433-page related party transaction report, we can see detailed information before and after the privatization of the game company Perfect World. We can also understand the details of the several transfers of Perfect Film and Television's equity. We can also see through the personnel structure. Some rumors circulated around the world.

1. Perfect World is not a backdoor listing.

As the Perfect Global announcement stated, this transaction does not constitute a backdoor listing.

Before the transaction, Shihezi Happy Perpetual Equity Investment Co., Ltd.(hereinafter referred to as "Happy Perpetual") directly held 25.06% of Perfect Global's shares, making it its largest shareholder. Chi Yufeng, chairman of Perfect World, holds 90% of the equity of Happy Permanent and is the actual controller.

After the transaction, Chi Yufeng held 52.91% of Perfect Global's shares without considering the matching fundraising and issuance of shares. Considering the matching funds to issue shares and the matching financing is fully raised, Chi Yufeng will control 57.77% of the company's shares and remain the largest shareholder and actual controller of Perfect Global.

Therefore, the capital injection of Perfect World into the assets of the listed company Perfect Global did not lead to a change in the company's control, so there was no backdoor listing.

Here, we will focus on Beijing Perfect Film and Television Media Co., Ltd.(hereinafter referred to as "Perfect Film and Television"), which previously borrowed Jin Lei's shares. The company's equity divestiture at that time was unimaginable and once caused a stir in the SEC. It was this company that completely separated Chi Yufeng from the actual management of the perfect world, and indirectly led to the turbulent dispersion of the game business and core management team.

According to the official website of Perfect Film and Television, this company was established in August 2008 and is a company under Perfect Time and Space. In August 2011, Perfect Film and Television was sold to Beijing Happy Permanent Film and Television Culture Co., Ltd. for a price of 360 million yuan. The latter's industrial and commercial registration information shows that it was established on June 10, 2011, with the legal person being Chi Yufeng, with a registered capital of 1 million yuan.

It is this investment that pushed Chi Yufeng and Perfect World to the forefront of public opinion. The outside world calculated the transaction based on the PE of Huayi Brothers, Enlight Media and other companies, and believed that this was Chi Yufeng's unique financial trick, selling the assets of the listed company at a low price to another company under his complete control. However, this is just an outside view, and the SEC finally approved the related transaction.

From this announcement, it is not difficult to find that Perfect Film and Television is indeed a golden tool. According to the disclosed information, in 2013 and 2014, Perfect Films 'operating income was 990.0862 million yuan and 925.7843 million yuan respectively, and the net profit attributable to the parent company was 130.0074 million yuan and 190.1908 million yuan respectively.

Looking back at it again, Happy permanently spent 360 million yuan to buy a company with such revenue scale, and it is inevitable that it will not be criticized.

2. Game revenue has declined and efforts have begun to be made.

The predecessor of the perfect world of e-sports was Perfect Time and Space. Starting from client-side online games, it has captured the hearts of many 2D and 2.5D players with its beautiful martial arts style. At that time, Shanda and Jiucheng still relied on agents. Through independent research and development, Perfect World carried the banner of national online games and also gained advantage in the market.

In addition to independent research and development, Perfect World is relatively at the forefront in expanding overseas markets. According to the announcement, since 2007, Perfect World has ranked first in the revenue of China's online game overseas export markets for seven consecutive years. Users cover more than 100 countries and regions, and is the intermediate force in China's online game exports.

However, excessive reliance on client-side online games has also caused Perfect World to miss the golden period of the development of web games and mobile games. In terms of the announcement risk warning, Perfect World admitted that Perfect World client online games have a long life cycle and maintained stable growth in revenue during the reporting period. Several games such as "Immortal Xian","Perfect World International Edition", and "DOTA2" contributed relatively high revenue.

According to financial performance data, from January to September 2015, Perfect World's revenue was 2.825.9298 million yuan. In 2014 and 2013, its revenue was 3.745.7069 million yuan and 3.029.002 million yuan respectively. Net profit for the same period was-273.3481 million yuan, 443.9551 million yuan, and 501.395 million yuan respectively. As Perfect World's growth slows down and costs climb to close to receivable year by year, Perfect World's net profit loss is intensifying day by day.

Until 2013, the Perfect World began to enter the mobile games and e-sports game markets. Among them, the revenue from mobile games is very small and has not reached a large scale. In the announcement, it only mentioned it with the gradual growth of revenue.

It is worth mentioning that Perfect has begun to make efforts in the e-sports market in the past two years, using its popular MOBA game "DOTA2" to hold professional leagues since 2014. The DOTA2 Asian Invitational Tournament is the largest and most grand competition in Asia. One, with a prize money of up to US$3.05 million.

Perfect World's move is undoubtedly to improve its competitiveness in the heavy online game industry. In other words, the Perfect World still puts its strategic center on PC client online games. Whether it is export or e-sports professional events, these are all means of market operation. Its essential core is no different from e-commerce activities: retaining new products and improving conversion rate.

As of the signing date of the report, Perfect World has 23 client games, 27 mobile online games, 4 web games and 2 video games in operation.

3. The core executive team has cut one crop after

another. In the online game industry, where there is no shortage of money, talents are scarce and expensive. Especially in companies like Perfect World that focus on independent research and development, often if the main program or main plan of a game leaves, they can easily get venture capital from outside and set up their own business.

Therefore, Shi Yuzhu recruited Lin Haihao and Yue Tao from Shanda. These two people, whom Shi Yuzhu called "pillars", created the giant's famous work "Journey". Xu Youzhen, the original main planner of Netease's "Dream Journey to the West", set up his own portal to establish Duoyi Network. They all have one thing in common. Highly similar prototypes can be found in their previous owners for the products they developed later. This is also why Shanda has continued to crack down on companies founded by former employees over the years. Because there are more and more competing products in "Legend" and they are more and more similar.

In the cultural and creative industry, talents, especially teams that have achieved market success, can easily be poached by their peers and targeted by venture capitalists. This is even more true in the online game industry. The copying threshold is low. Once you go online, you can make money 24 hours a day. If you catch up with RMB players who are crazy, you will be sitting and collecting money.

We might as well study the structure of the Perfect Game Production Team. As shown in the figure below, there are the main planner, program leader, and main artist below the producer. Among domestic online game companies, the production team of Perfect World is a group that emphasizes game graphics.

However, the success of a game is not limited to research and development, but the operation team is becoming increasingly important. Especially after 2007, Tencent, Netease, Shanda, Giant, Changyou, and Perfect basically monopolized the power of PC online games. As the competition for game homogenization becomes more and more intense, the operation of games is particularly important. This is also the reason why Perfect works hard in sailing and competitions.

Over the years, there are many R & D personnel who have left the Perfect World. For example, Zeng Ge, the early "father of the Immortal Dynasty", founded his own business and founded Fun Travel Sky (now renamed Infinite Time and Space). In 2014, Li Jian, the person in charge of Shanghai Perfect and the former SVP of Perfect World, left. During this period, Sohu Changyou's poaching and the continuous departure of core R & D and operations personnel accelerated the exposure of the crisis of lack of perfect management.

Especially after Xiao Hong, who was born in human resources, took the helm of the CEO of Perfect World, the personnel turmoil in Perfect World further intensified. Zhu Qi, who originally focused on operations, has basically been more and more marginalized from President of Perfect World, to Issuing Officer of Perfect World Asia Pacific, and then to Chief Strategic Product Officer.

In August 2014, Zhu Qi and Ma Ning, vice president in charge of the marketing department, were once exposed to leave. Although the rumors were refuted by the parties, judging from the management and core team on the announcement, these two, especially Zhu Qi, did not appear on the list, which basically proves the authenticity of the rumors.

4. Fosun withdraws from Perfect World

With the announcement of Perfect Global, Fosun shines in front of our eyes again.

Since 2012, Fosun has attracted shares in Perfect World through many operations in the secondary market. As of privatization, Fosun's stake in Perfect World increased to 16.5%, second only to the largest shareholder Chi Yufeng's 16.8%.

Fosun previously believed that these stocks were undervalued in the United States and were in line with the domestic demand market standards of high investment growth. In addition to the Perfect World, Bona Films and Focus Media are all such examples. However, in the process of privatizing the Perfect World, Fosun withdrew halfway after making profits.

According to the shareholding structure announced in the announcement, Perfect World after the demolition of the VIE is jointly held by Perfect Digital Technology and Shihezi Junyang, of which Perfect Digital Technology holds 75.02%, and the latter holds 24.98%. Perfect Digital Technology Co., Ltd. is jointly funded by Chi Yufeng and Yang Xiaoxi, deputy general manager of Shanghai Perfect. The former holds 90% of the shares and the latter holds 10%. Shihezi Junyang is a management shareholding platform for Perfect World. Its ultimate natural person partners are the core management and core technical personnel of Perfect World and its subsidiaries.

From the perspective of its shareholding structure, Fosun has retreated unscathed from the privatization of Perfect World to the dismantling of the VIE. When Perfect World injected capital into Perfect Global, Fosun did not appear on the list of shareholders or institutional investors.

According to the information disclosed in the announcement, calculated that the price of the underlying asset of this transaction is 12 billion yuan and the stock issue price of the issued shares to purchase assets is 19.53 yuan/share. The total number of shares issued by the company for the purchase of the underlying asset is 614,439,323 shares. Among them, Perfect Digital Technology issued 460,944,729 shares, accounting for 75.02%, and the rest are Shihezi Junyang.

Therefore, it is very likely that Fosun International will have already made all the money and left when the Perfect World is privatized. An important reason is that, unlike Focus Media's backdoor listing, Perfect World already has Perfect Global, a shell company injected by Perfect Films in advance, and it cannot form business synergy with Fosun.

For Fosun, this is indeed a good financial investment, so why not?

Editor: yvonne