Take-private deal could value Razer at up to $6.1 billion

The move comes as the consortium believes Razer has been undervalued in Hong Kong. ST PHOTO: DESMOND FOO

HONG KONG (REUTERS) - A consortium led by top executives of Razer plans to value the Hong Kong-listed maker of gaming hardware at up to HK$35 billion (S$6.1 billion) in a deal to take it private, said two people with direct knowledge of the matter.

Chairman Tan Min-Liang and non-executive director Lim Kaling, with a combined stake of nearly 60 per cent in Razer, lead the group offering up to HK$4 a share, the two sources said, or almost double its average price of HK$2.1 over the past month.

The move comes as the consortium believes Razer, based in the United States and Singapore, has been undervalued in Hong Kong, where investors typically pay more attention to tech firms from mainland China, they added.

The sources declined to be identified because of confidentiality constraints.

In a regulatory filing on Tuesday, Razer cited its board as saying there is no certainty that the discussions among Mr Tan, Mr Lim and the financial investors will ultimately lead to the terms of a potential transaction being agreed upon.

It said the potential offer price has not been determined and no decision had been made by Mr Tan and Mr Lim on whether to proceed with any potential transaction.

Razer declined to comment, and Mr Tan and Mr Lim also declined to comment.

Shares of Razer ended 11.5 per cent higher on Tuesday, after paring a rise of 23 per cent in afternoon trade following the Reuters report.

A deal would further feed a surge in strategic investors and buyout firms tapping Hong Kong companies for take-private opportunities, lured by undervalued shares.

Hong Kong-listed firms have been involved in US$8.15 billion worth of take-private deals in 2021, versus US$23 billion for all of last year, Refinitiv data showed.

In late October, Razer said in a filing that Mr Tan and Mr Lim were in preliminary talks with financial investors to explore the possibility of a transaction.

The consortium is also in talks with private equity firm CVC Capital Partners for the buyout, said one of the two sources, and two others with knowledge of the matter.

Buyout firm KKR has also studied the deal but has yet to decide whether to invest, said the first two sources and another person.

CVC and KKR declined to comment.

The talks have advanced and the consortium aims to announce the deal by the end of 2021, the first two sources said.

It aims to eventually list Razer in New York to exploit higher valuations for tech stocks, they added.

Founded in the United States and Singapore in 2005, Razer has expanded from wireless mice to make gaming laptops and keyboards besides other accessories.

It swung to a record net profit of US$31.3 million in the first half of 2021, riding a gaming boom as Covid-19 lockdowns kept people at home, versus a net loss of US$17.7 million a year earlier.

The United States accounted for 42 per cent of the first-half revenue.

Razer went public at HK$3.88 per share in the Asian financial hub in 2017, in a stellar debut powered by strong retail demand for new technology stocks.

But its share price more than halved last month from this year's peak of HK$3.36 in February, while the benchmark Hang Seng Index fell 24 per cent over the same period.

However, the shares have jumped 30 per cent to five-month highs since the October filing on investor talks.

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