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ECEC in talks for Hero
Posted on Tuesday, 14 May 2019 14:49
Zhejiang East Crystal Electronic (ECEC) is in talks to acquire Hero Entertainment, a little over a month after Shenzhen Hemei Group’s attempt to take over the Chinese online game developer collapsed due to disagreements over key conditions.

The latest proposal would see the loss-making electronics manufacturer diversifying into digital entertainment content after struggling to stay in the black in recent years amid increased competition with the domestic sector.

Hero was launched in June 2015, is listed on the NEEQ over-the-counter stock exchange in China, and has a footprint that includes mainland China, Hong Kong, Macau and Taiwan.

The group generated revenue of CNY 1.19 billion (USD 173.23 million) in the financial year to 31st December 2018 (FY 2017: CNY 1.04 billion) and booked net profit attributable to shareholders of CNY 727.73 million (FY 2017: CNY 915.05 million).

It is backed by the likes of Tianjin Dinuo Investment Management and Sequoia Capital, as well as Huayi Brothers Media.

The multinational entertainment conglomerate is the second-largest shareholder after acquiring a 20.0 per cent stake in 2016 to CNY 1.90 billion, which valued Hero at about 19x estimated FY 2016 net profit.

At the time, Huayi was granted right of first refusal in terms of adapting any esports games developed or managed by Hero into films or television and web series at the fair price and on equal terms.

ECEC would be getting its hands on a mobile game producer and distributor with a stable of game titles under its belt ranging from Art of War: Red Tide and Shadow Blade 2 to Fengfeng Battleship and To Dance Together.

The group has not provided further details regarding the discussions, merely cautioning they are in the early stages, though earlier talks with Hemei concentrated on an acquisition in exchange for new shares issued at CNY 5.94 apiece.

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