Opera Drops More Than 13% As Sale-Deal Fails to Get Regulatory Approval

It is still not certain whether the US or Chinese regulatory body opposed the approval of the deal.

Opera Drops More Than 13% As Sale-Deal Fails to Get Regulatory Approval

By: Abdullah Saeed Qureshi Published:
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It is still not certain whether the US or Chinese regulatory body opposed the approval of the deal

Opera Software ASA (FRA:OS3) announced on Monday that it would sell its business components partially to the Chinese consortium led by Qihoo 360 Technology, a leading Chinese security-software firm and Beijing Kunlun Tech, China’s leading online games company. The announcement came after the Norwegian based software giant failed to obtain the regulatory approvals required for the $1.2 billion deal to sell the entire company to the same Chinese group.

Opera’s shares were down 13.31% in the France stock exchange. Similarly, the company’s shares fell down more than10% in Oslo, the most in one and a half year. The deal was subject to approval from both the Committee on Foreign Investment in the US and the Chinese government. However, it is still not confirmed which regulatory body opposed the complete acquisition.

Back in February, CBN reported that the company had received a buyout offer from the Chinese consortium subject to government’s approval. It said: “The offer is for 100% of the organization, and the Chinese group is ready to pay $8.29 (71 Norwegian crowns) per share a 45.6% premium on the organization's valuation in view of its latest trading price.”

The software giant said that the original deal wasn’t able to get the required regulatory approval before the assigned deadline, which was Friday July 15, without giving any further details. Now, the company has entered into a $600 million deal with the same Chinese buyers, which have agreed to purchase components of Opera’s consumer business. Other than the two Chinese tech giants, private equity firm Golden Brick Capital Management Ltd and Yonglian Investment Co are also part of the Chinese group participating in the acquisition.

According to Opera, the conglomerate will now buy the company’s “desktop browser,” its flagship products, technology licensing outside of Opera TV, performance and privacy apps, and a 29.09% interest Opera holds in a Chinese joint venture.

Additionally, the Norwegian based firm said: “Opera Mediaworks, Apps & Games and Opera TV aren’t included in the sale.” Lars Boilesen, CEO Opera, said: “We all tried very hard to close the public offer and are naturally disappointed that we were unsuccessful. However, we believe that the new deal is very good for Opera employees and Opera shareholders.”

Moreover, the company also highlighted that it will get access to the vast user base of Qihoo 360 and Kunlun through the deal as well as additional financing from the Chinese group.

“The Consumer part has a good fit with the objectives and strategy of Consortium, and will become part of the ecosystem with substantial investment capacity. For Opera shareholders we are selling approximately ¼ of the company for $600m, which is an attractive price for this part of our business,” the company’s CEO commented on the new deal.

Opera also indicated that it would have about 560 employees by the end of first quarter fiscal year 2016. Previously, the company had 1,669 employees. Additionally, the Chinese consortium would be able to use Opera’s name, brand and trademark for the first 18 months, after which the Chinese group had to come up with a new name.

Mr. Boilesen, also highlighted that the acquisition by a Chinese group would allow the firm to further strengthen its business in emerging markets and would enable it to serve its customers with greater innovation. He added, “We believe that the consortium, with its breadth of expertise and strong position in emerging markets, will be a strong owner of Opera.

Opera, which has a user base of over 350 million on desktop gadgets and smartphone, was also in talks with the social networking giant Facebook Inc (NASDAQ:FB). A year ago, however, the financial woes surrounding the company and slowing sales caused the deal to go down without any further assessment. Opera was one of the first companies to develop compactable programs for smartphones but itss progress didn’t accelerate as expected.

According to a report, Opera Mini browsers held 7.28% of tablet and mobile market as of January 2016, which is significantly lower than the 41.57% for Google Chrome, 34.12% for Safari browser and 11.3% for other Android browsers.

Moreover, the company named Morgan Stanley & Co. and ABG Sundal Collier ASA as its financial advisors, while Arctic Securities AS will be counseling several participants of the Chinese consortium.

The company has been looking for a buyout offer since a long time amid dismal financial performance. It was necessary for the company to strike a deal with the Chinese group, and we believe that though the entire sale failed, it at least managed to get something out of the deal.

Opera stock has lost more than 63% of its value in the past one year and it was important for the company to find a strategic investor so that it could bring back its lost fortunes. Accroding to Opera’s Chairman Sverre Munck, the Chinese consortium is giving a good premium for the company’s share and it’s the share price trend that really matters.