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What: Shares of Shanda Games Limited (UNKNOWN:GAME.DL) rose more than 15% Monday after the company announced it has received a non-binding proposal to take the company.private for $6.90 per share.
So what: The offer, which values Shanda Games at $1.9 billion, came from a consortium including Shanda Interactive Entertainment and an affiliate of Primavera Capital. Currently, they collectively own around 76.2% of Shanda Games' outstanding shares.
Now what: Shanda Games' board hasn't made a decision on whether to accept the offer, which represented a 21% premium to Friday's close. Shares closed today at $6.50 per share, reflecting uncertainty surrounding whether the acquisition will go through.
To be sure, even though the company has had trouble growing its top line over the past several years, it's hard to claim shares are overvalued trading around 8 times next year's estimated earnings. But the stock has also more than doubled over the past year -- including a 45% pop over the past 30 days alone -- and closed today at a new 52-week-high of $6.50 per share. In the end, while I'll admit Shanda Games could potentially negotiate its price upward, I wouldn't blame investors for taking profits today.
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