Company Update (NASDAQ:DSKY): iDreamSky Technology Ltd (ADR) Enters Into Definitive Merger Agreement for Going Private Transaction

iDreamSky Technology Ltd (ADR) (NASDAQ:DSKY), China’s leading independent mobile game publishing platform, announced that it has entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”) with Dream Investment Holdings Limited (“Parent”) and Dream Merger Sub Limited (“Merger Sub”), a wholly-owned subsidiary of Parent. Pursuant to the Merger Agreement, at the effective time of the merger, a consortium of management and investors will through Parent acquire the Company for a cash consideration equal to US$3.50 per Class A and Class B ordinary share of the Company (each, a “Share”) or US$14.00 per American depositary share of the Company, on the basis that each American depositary share represents four Class A ordinary shares (each, an “ADS”). This amount represents a premium of 39.8% to the volume-weighted average closing price of the Company’s ADSs during the 60 trading days prior to June 12, 2015, the last trading day prior to June 15, 2015, the date that the Company announced it had received a “going-private” proposal.

The consortium is led by Mr. Michael Xiangyu Chen, chief executive officer and chairman of the board of directors of the Company and Mr. Anfernee Song Guan, chief technology officer and a director of the Company, together with certain rollover securityholders (the “Rollover Securityholders”) and new investors, including, among others, V Capital, Prometheus Capital, Legend Capital, We Capital, Star VC or their affiliated entities.

Subject to the terms and conditions of the Merger Agreement, at the effective time of the merger, Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation and a wholly-owned subsidiary of Parent, and each of the Shares (including Shares represented by ADSs) issued and outstanding immediately prior to the effective time of the merger will be cancelled and cease to exist in exchange for the right to receive US$3.50 per Share orUS$14.00 per ADS, in each case, in cash, without interest and net of any applicable withholding taxes, except for (i) Shares held by Rollover Securityholders, (ii) Shares (including Shares represented by ADSs) owned by Dream Technology Holdings Limited (“Holdco”), Parent, Merger Sub or the Company (as treasury shares, if any) or by any direct or indirect wholly-owned subsidiary of Holdco, Parent, Merger Sub or the Company, and any Shares (including Shares represented by ADSs) reserved (but not yet allocated) by the Company for settlement upon exercise or vesting of any Company share awards, and (iii) Shares owned by holders who have validly exercised and not effectively withdrawn or lost their rights to dissent from the merger pursuant to Section 238 of the Companies Law of the Cayman Islands, which Shares will be cancelled at the effective time of the merger for the right to receive the fair value of such Shares determined in accordance with the provisions of Section 238 of the Companies Law of the Cayman Islands.

The Company’s board of directors, acting upon the unanimous recommendation of the special committee formed by the board of directors (the “Special Committee”), approved the Merger Agreement, and resolved to recommend that the Company’s shareholders vote to authorize and approve the Merger Agreement and the merger. The Special Committee, which is composed solely of independent directors of the Company who are unaffiliated with Parent, Merger Sub or any member of the consortium or management of the Company, exclusively negotiated the terms of the Merger Agreement with the consortium with the assistance of its independent financial and legal advisors.

The merger, which is currently expected to close during the second quarter of 2016, is subject to various closing conditions, including a condition that the Merger Agreement be authorized and approved by an affirmative vote of shareholders representing two-thirds or more of the Shares present and voting in person or by proxy as a single class at an extraordinary general meeting of the Company’s shareholders.

Pursuant to a support agreement entered among Parent, Rollover Securityholders, and certain other existing shareholders of the Company (together with the Rollover Securityholders, the “Supporting Securityholders”), the Supporting Securityholders have agreed to vote all the Shares and ADSs beneficially owned by them, any Company Restricted Shares and/or Company Options held by them and any other Shares and/or Company restricted shares acquired (whether beneficially or of record) by them after the date of the Merger Agreement and prior to the earlier of the Effective Time and the termination of the Merger Agreement in accordance with its terms, in favor of the authorization and approval of the Merger Agreement and the merger. If completed, the merger will result in the Company becoming a privately-held company and its ADSs will no longer be listed on The NASDAQ Select Global Market.

The consortium intends to fund the merger through a combination of (a) rollover financing from the Rollover Securityholders of 73,418,670 Shares, (b) equity financing provided by certain investors of the consortium in an aggregate amount equal to approximately US$229,914,969 pursuant to equity commitment letters, and (c) debt financing arranged by Shanghai Pudong Development Bank Co., Ltd., Shanghai Branch (the “Lender”) in an aggregate amount of US$161,000,000 pursuant to a debt commitment letter issued by the Lender.

The Company will prepare and file with the U.S. Securities and Exchange Commission (the “SEC”) a Schedule 13E-3 transaction statement, which will include a proxy statement of the Company. The Schedule 13E-3 will include a description of the Merger Agreement and contain other important information about the merger, the Company and the other participants in the merger.

Duff & Phelps, LLC is serving as the financial advisor to the Special Committee, Shearman & Sterling LLP is serving as U.S. legal counsel to the Special Committee, and Maples and Calder is serving as Cayman Islands legal counsel to the Special Committee. Hogan Lovells is serving as the legal counsel to Duff & Phelps.

Kirkland & Ellis is serving as U.S. legal counsel to the consortium, Walkers is serving as Cayman Islands legal counsel to the consortium, and China Renaissance Securities (Hong Kong) Limited is serving as the financial advisor to the consortium. (Original Source)

Shares of iDreamSky Technology closed yesterday at $13.27, down $0.02 or -0.15%. DSKY has a 1-year high of $17.60 and a 1-year low of $6.64. The stock’s 50-day moving average is $12.61 and its 200-day moving average is $11.80.

iDreamSky Technology Ltd through its subsidiaries is engaged in the licensing and operating of single player mobile games and mobile online games in the People’s Republic of China.

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