Renren's China expansion unclear after portals axed
Renren Media has cancelled plans to acquire assets of three China portal operators, leaving the company's mainland expansion plan in doubt.
Renren said it had decided not to buy HireChina, Dezhela and Shanghai Xing Chuan because the portals had failed to attain certain performance levels relating to marketing, sales and content development.
The Internet portal operator's change of heart means HK$73.13 million worth of shares issued to cover the acquisitions was wasted, analysts said.
The total cost of the three assets was HK$85.85 million, to be settled by share consideration.
Renren Media said in its announcement yesterday that the company did not invest any cash in projects relating to the three acquisitions and did not make any commitment to any third party in respect to the projects, thus resulting in no impact on the company's performance from the termination of the agreements.
However, the company has issued 418.35 million new Renren Media shares, worth HK$73.13 million, in the past months to settle part of the acquisition cost.
Though Renren Media said the remaining 116.91 million shares as prescribed in the purchase agreements would not be issued following the termination of the acquisitions, those shares already issued would not be returned to the company.
The acquisitions originally formed the company's plan to expand into the China market.
Analysts were concerned the company's business plan might be significantly affected after the termination of the acquisitions.
The three targets were all engaged in the mainland's Internet portal business.
Their primary portals include entertainment-based Web sites www.samedream.com and www.
Renren Media said it would focus its Internet business under the www.renren.com domain name and intended to continue its main areas of business which includes operating its bilingual destination Web site.
In August, the company axed 102 employees, about a third of its staff, to trim costs.
The firm's backers include Rupert Murdoch's News Corp, United States venture capital firm J. H. Whitney and Hong Kong-based Asiatech Ventures.
Renren Media was suspended from trading on February 16 and will remain suspended pending an announcement relating to the possible sale of a significant holding in the company.
The counter closed at 4.2 HK cents last Thursday before its suspension.