The management of PC and peripherals maker Razer has formally announced plans to take the company private at a valuation of HK$24.70 billion ($3.17 billion), reports Reuters. A group led by executives and a private equity firm cited plans to take significant risks in a bid to pursue new business opportunities in fintech and software as the reasons for the proposal.
Razer is one of the leading suppliers of premium gaming PC peripherals and PCs. For the first half of 2021, the company posted a record-high revenue of $752 million, a 68% increase year-over-year, and a net profit of $31.3 million, as compared to a net loss of $17.7 million in the first half of 2020.
The bulk of the company's revenue ($677.3 million) came from sales of hardware, which includes some of the best gaming mice. By contrast, much more profitable albeit risky Razer Gold and Razer Fintech services ($72.8 million) as well as software ($1.9 million) businesses accounted for a relatively low portion of its earnings.
"At present, the hardware business contributes to most of the company’s revenue, while the other businesses are at a relatively early stage of development," a statement by Razer reads. As a listed company in Hong Kong, however, the company is restrained from pursuing opportunities in the software and services segments which tend to be riskier and may have an adverse impact on the company’s near-term profitability and share price."
By taking the company private, its management gains the flexibility necessary to address fintech and software business opportunities.
"As the company increases its focus on expanding in these emerging segments, the offeror believes that the successful implementation of the proposal will provide more flexibility to the group as a privately-operated business to implement its business strategies or to pursue other business opportunities that it may not be practicable to pursue as a listed company, without being subject to regulatory restrictions and compliance obligations arising from being listed on the Stock Exchange and without focusing on the short-term market reaction."
The group, led by CEO and creative director Min-Liang Tan and non-executive director Kaling Lim, who together own around 57% of Razer, plus CVC Capital Partners, has offered to pay up to HK$10.79 billion ($1.38 billion) to buy all remaining shares that are traded at the Hong Kong stock exchange at HK$2.82 per share, reports CNBC. The proposed price marks a premium of approximately 44% to Razer's closing price on October 28, a day before it emerged that the chairman offered such a deal. After the proposal was announced, Razer's shares dropped to HK$2.46.
Razer went public in mid-2017 to raise $600 million for future growth.