Chinese Internet firm Shanda Interactive said it received a cash offer of about $2.33 billion from its chief executive and key shareholder Tianqiao Chen to take the company private.
The buyers have held preliminary discussions with J.P. Morgan about financing the proposed transaction and received a highly confident letter, the company said in a statement.
The buyers, including Chen, his wife and non-executive director Qianqian Luo, and his brother and Shanda's Chief Operating Officer Danian Chen, together control about 68 percent of the company, excluding options, as of September 30.
Going private does make sense but the timing I'm not too sure about -- why now? Nomura Securities analyst Jun Yoon said.
J.P. Morgan will also act as the financial advisor for the buyers, said the company incorporated in the Cayman Islands.
Shanda Interactive, which spun off its core games business -- Shanda Games -- through an IPO in 2009, is seeing trying times with its non-game units delivering weak results, and is trying to diversify into other entertainment areas.
The company has always wanted to do things outside of gaming; they have wanted to be a full-on entertainment company. Perhaps this is another way for the company to that without going through public scrutiny, Yoon said.
The company's online literature unit, Cloudary Corp, has filed with U.S. regulators for an IPO of about $200 million.
Shanda Interactive reported net revenue of $264.2 million for the April-June quarter.
Chen's offer values Shanda at $41.35 per American Depositary Share -- a 23.5 percent premium to Friday's close -- or $20.675 per ordinary share in cash, the company said in a statement.
Analyst Yoon said the premium was in line with historical valuations and does not expect any other offers.
The buyers expect the commitment for the required debt financing to be in place by the time the definitive agreement is signed, they told Shanda in a proposal letter dated October 15.
The company's board has formed a special committee of independent directors to consider the proposed transaction, Shanda said.
The company's ADSs jumped as much as 21 percent to $40.43 in early trading on Monday, making them among the largest gainers on Nasdaq.
(Reporting by Sayantani Ghosh in Bangalore; Editing by Maju Samuel)