Shenzhen Zhongqingbao (SZ:300052), an online game developer, acquired a 51 percent stake in two mobile game companies respectively, namely, More Fun Digital Technology and Small-tech respectively, for 357 million yuan ($57.87 million) and 87.47 million yuan (statement).

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More Fun, a pioneer mobile game service in China, boasts a research team of more than 150 talents. The company generated 10.55 million yuan of net profit in the first half of this year, of which, the flagship product Junwang2 accounts for 60 percent. The original shareholders of More Fun signed a VAM (valuation adjustment mechanism) agreement with Zhongxingbao, promising that the company’s net profit for 2013 to 2015 will reach 45 million yuan, 80 million yuan and 110 million yuan, respectively. Otherwise, they will compensate the losses of Zhongqingbao. Zhongqingbao planned to fully acquire the company in the long run (source in Chinese).

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Small-tech, an operator of browser and mobile games, enjoys competitive advantages in multi-platform online games thanks to its cooperation with Tencent, which holds a 13.5 percent stake in the firm. The company recorded a net profit of 43.19 million yuan in 2012. The company’s VAM conditions with Zhongxingbao are achieving net profits of 24.50 million yuan, 40 million yuan and 52 million yuan in 2013 to 2015, respectively.

Mobile game industry became a trending sector recently, recording several large acquisition cases such as Ourpalm acquired Dovo Technology and Datang Telecom merged Yaowan.com. Zhongqingbao ditched former business focus of terminal games to tap mobile game sector. Some funds used to acquire the aforementioned two companies were drawn from the cash pool previously raised for terminal games in the IPO.