Chapter 30: Saint Games Acquisition (Part 5)

Chapter 30: The Saint Games Acquisition (Part 5)

In late October, the Fanhai Group once again issued a tender offer to Saint Games' shareholders, at a price far above the previous offer. This time, it came with conditions: first, obtaining approval from both countries; second, acquiring at least 50% plus one share, ideally exceeding 90% to take Saint Games private—the laws of both countries stipulate that once a shareholder exceeds 90%, one may choose to force the purchase of remaining shares.

Clearly, this time Fanhai was going for control.

The offer was £35 a share, while Saint Games—weighed down by its lousy financials—closed at £18, a premium of nearly 100%.

Since the offer hadn't been pre-approved by Saint Games' board, it turned into a hostile takeover bid.

Saint Games' shining "white knight" had suddenly turned hostile, just like Qinghui had.

The difference? This time would be easier than Qinghui's attempt, because months earlier, Saint Games had handed 31% of its shares straight to Fanhai.

The second the news broke, media on both sides of the pond jumped on it:

"The white knight turned into a barbarian at the gate?"

"Fanhai Group! A Chinese company launches a rare hostile takeover!"

Saint Games' board immediately told shareholders to "sit tight," but Zhao Hanqing told reporters: "Fanhai is confident we'll get support from at least 50% of shareholders."

Fanhai had come prepared for this hostile takeover.

Hostile takeovers of tech companies are rare. A tech company's core is its tech—its people. Even if you buy the company, if you can't keep the talent, the deal is worthless.

But rare doesn't mean impossible. So, as usual, Fanhai followed up the tender offer with an open letter.

The open letter was penned by Jing Hong himself. The gist:

Fanhai has no intention of changing Saint Games' direction; the company will keep operating independently. Fanhai loves Saint Games' catalog and wants to protect the team's enduring love, awe, and respect for games—their brilliant imagination, top-tier technical chops, unmatched aesthetic sense, and the bond forged by a shared higher purpose.

The letter went on: the world can be a dull place, but games let people go on incredible journeys—become someone else, take on a new identity, roam, soar, try new things, live a different life. There's no joy quite like it. Fanhai is grateful to Saint Games' staff for the joy they've brought the world and is ready to do whatever it takes to protect their founding vision.

Jing Hong mentioned that last month he met a guy named Sun who dreamed of going pro. Sun lost both legs at ten—couldn't run, couldn't walk, couldn't do anything for himself, totally dependent on his parents. He felt like a burden, like he'd lost his dignity as a human being years ago. But once he found Expedition, he threw himself into it completely. He said: "A guy like me—only when I'm out there in Expedition's sea of stars, fighting across galaxies, covering endless miles, saving people in need, do I feel like I've still got fire in me, like I'm actually alive. Only in Expedition do I feel like a real person. At least I know I still have a sea of stars." Expedition also gave Sun a new dream and a goal: to go pro, bring people joy, and maybe use his tournament winnings to buy a top-of-the-line bionic leg.

Then Jing Hong pivoted: Fanhai wants to change the industry's "consensus" of using "passion" to attract talent. Game devs are just as talented as engineers at big tech, but they get paid half as much. What's especially galling is that some of these studios are raking it in. Fanhai doesn't get it. Saint Games' people deserve better. So if this deal goes through, salaries will be bumped up to big-tech levels to reward that passion. Fanhai believes passion is rare in this world—something to be treasured, not taken advantage of.

In the letter's closing, Jing Hong said Fanhai had already talked to several execs beyond the CEO—the company's veterans and key players would all be staying, and they were joining Fanhai in asking everyone else to do the same.

Jing Hong's letter wasn't bluffing. Earlier, Zhao Hanqing had already talked to Mark Greenberg's two partners, and both had agreed to stay. The CEO was more of a manager—good at operations—but the creative vision and world-building came mostly from his partners. The partners were pretty straightforward guys.

Of course, Zhao Hanqing had thrown money at them to make it happen. The partners would cash out their shares but stay on, and Zhao Hanqing promised them fat salaries for it.

But it wasn't just about the money. The CEO was such a mess that the partners didn't exactly love or rely on him, and they genuinely cared about Saint Games and the games they'd built.

Fanhai's open letter worked immediately. They definitely didn't want to be bought by a Chinese company, but the letter felt genuine—and more importantly, Fanhai was promising raises.

"Exploiting passion" was, yeah, a standard industry move. People worked for love, not money—like talking about cash was somehow tacky. But when they looked at engineers at other companies, they couldn't help feeling bitter and asking, "why not us?"

On a gaming forum, a longtime user claiming to be a Saint Games employee posted that he'd been against Fanhai at first, but after reading the letter, he'd changed his mind—maybe it'd actually be better than the current situation. He added that his coworkers generally thought Fanhai seemed genuinely sincere.

Jing Hong read his grammar and figured the guy was Japanese.

Looked like this hostile takeover was going to go off without a hitch.

Jing Hong figured Saint Games' shareholders would start dumping their shares any day now.

...

What Jing Hong and Zhao Hanqing never saw coming was that, after Thanksgiving, the Saint Games deal would take a sudden nosedive.

Seeing the board and its "white knight" Fanhai at odds, Qinghui Group swooped back in with a competing tender offer—priced a bit higher than Fanhai's, but not by much.

Jing Hong hadn't figured that even after Qinghui pulled out, Zhou Chang would still be keeping an eye on Expedition—just as un-fooled by Mark Greenberg's games as they were, almost like he'd predicted Fanhai and Saint Games would clash.

Saint Games' board was being extra passive-aggressive again. Under pressure, the board caved and gave shareholders four options: "accept Fanhai's offer," "accept Qinghui's offer," "sell shares on the market," or "continue waiting for a new offer."

A masterclass in saying absolutely nothing.

With two offers on the table, every shareholder wanted to cash out, so they pushed the board for a recommendation. And Saint Games' board played another word game—recommending all options effectively meant recommending none.

Saint Games' board was stalling for time.

Jing Hong heard that the "stalling" was mainly the CEO's—Mark Greenberg's—idea.

Legally, the board has an obligation to seek profits for shareholders. Refusing to "recommend" either offer seemed indefensible, but in reality, shareholders and the board often have conflicting interests. The board didn't want the company acquired and had its own agenda. This time too, Saint Games' board was using meaningless words to buy time.

Clearly, the white knights and small consortiums Mark Greenberg had found were incapable of competing with Fanhai and Qinghui in the bidding.

Meanwhile, in the market, knowing that Fanhai and Qinghui were fighting for control of Saint Games, a large number of hedge funds rushed to buy Saint Games shares, driving the stock price steadily upward. It looked like Saint Games' board could soon use "undervalued" as an excuse to reject the offers. At that point, Fanhai and Qinghui would both have to increase their total consideration.

In the general manager's office at Fanhai Group, Zhao Hanqing sought Jing Hong's advice: "What do we do? The situation is complicated now. On one hand, we're competing with Qinghui; on the other, Saint Games' stock price on the exchange keeps climbing and is now approaching the offer price. If it goes higher, both of us will have to increase our consideration." Clearly, the offer price must be higher than the secondary market price, otherwise shareholders won't accept the offer and will instead sell directly on the trading platform—simpler and faster—a click on the trading app and it's all done in a second.

"..." Jing Hong closed a document and said, "Let me think."

If the final price got too high, that certainly wouldn't be appropriate. In finance, there's even a term: "winner's curse"—referring to bidding up the price to excessively high levels in order to win the target company.

Zhao Hanqing added: "Our current offer is already at its ceiling."

Jing Hong tapped the table with his fingers and asked: "Have you factored in the dollar exchange rate?"

In 2018, the Federal Reserve maintained a hawkish stance, reversing its dovish approach of recent years, raising rates multiple times by 25 basis points each. Global capital flowed into the US, the dollar strengthened sharply, and the USD/CNY exchange rate was approaching 7.

And Fanhai's acquisition was being conducted through its US subsidiary. With the dollar strengthening, the acquisition funds should be larger.

Zhao Hanqing said: "Already factored in."

Jing Hong nodded: "Understood."

"Then please take a look," Zhao Hanqing said, then added: "Oh, I also looked at Qinghui's offer documents—they include a discriminatory acquisition clause against Fanhai Group as a Saint Games shareholder. Fanhai has the right to veto this offer."

"Mm," Jing Hong said. "Fine. Veto this offer first and make Qinghui resubmit one."

After Zhao Hanqing left, Jing Hong pressed his brow.

Zhou Chang... Zhou Chang again.

A name he couldn't get around.

...

A week after Qinghui issued its competing tender offer, Fanhai Group suddenly announced two major pieces of news.

First, Qinghui Group's offer contained a discriminatory clause against Fanhai, and Fanhai Group had vetoed it.

But the more surprising second item: Fanhai Group announced it would absolutely not raise its offer, maintaining the current £35 per share, emphasizing that the current offer price already exceeded actual value and that its previous offer was already full of sincerity.

At this point, Fanhai didn't say that Saint Games' financials had been manipulated by the company itself, but instead stated that "Saint Games' previous stock price truly reflected its recent operational performance." Saint Games couldn't complain either.

This "no price increase" announcement poured cold water on the frenzied capital market. Saint Games' stock price finally stopped rising and stabilized.