Sina Loads Poison Pill Against Possible Shanda
Takeover
Sina announced a shareholder rights agreement yesterday
which would issue more Sina shares if Shanda continued
to buy Sina shares on the open market. Under the plan,
if Shanda acquires a further 0.5 per cent stake, reaching
20%, existing shareholders will have the right to buy
shares in Sina at half the market price, an arrangement
that would dilute Shanda's stake and prevent it from
buying control of Sina.
The move follows quickly on the heels of Shanda's purchase
of 19.5%
of Sina.com's shares, which was announced last Friday.
Sina.com's shares fell in price early in February when
the company announced that the Chinese government's State
Administration for Radio, Film and Television (SARFT)
had banned the sale of fortune-telling advertising, which
immediately cut Sina.com's earnings picture in half for
the first quarter.
Sina has been overly dependent on SMS revenue over the
past two years, and has not successfully diversified
its revenue stream into other more profitable areas,
such as gaming. Shanda has had a better relationship
with the Chinese government than Sina. Netease (Nasdaq:
NTES), another leading Chinese portal has successfully
diversified into gaming, and reported fourth quarter
revenues of US$31.6 million, up 9.7 percent on third
quarter revenues of $28.8 million, after market close
Tuesday.
Shanda has executed well in the gaming sphere, and has
continued to show results which impress Wall St. and
investors. A combined Sina/Shanda would tap into Sina's
larger user base, and put the company in a very strong
position when 3G licenses are issued to carriers. Shanda
is already at work developing games
for mobile phones, as well as developing its own
gaming console. The company is also said to be involved
in discussions with Microsoft about the the launch of
IP-TV (Internet TV) in China.
Current developments set the stage for a board-level
proxy fight between Sina and Shanda.
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