A consortium led by top executives of Razer Inc plans to value the Hong Kong-listed maker of gaming hardware at up to HK$35 billion ($4.5 billion) in a deal to take it private, said two people with direct knowledge of the matter.
Chairman Min-Liang Tan and non-executive director Kaling Lim, with a combined stake of nearly 60% 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 that there is no certainty that the discussions among Tan, Lim and the financial investors will ultimately lead to the terms of a potential transaction being agreed.
It said the potential offer price has not been determined and no decision had been made by Tan and Lim on whether to proceed with any potential transaction.
Shares of Razer ended 11.5% higher on Tuesday, after paring a rise of 23% in afternoon trade.
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 $8.15 billion worth of take-private deals in 2021, versus $23 billion for all of last year, Refinitiv data showed.
In late October, Razer said in a filing Tan and 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 (KKR.N) 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 $31.3 million in the first half of 2021, riding a gaming boom as lockdowns over COVID-19 kept people at home, versus a net loss of $17.7 million a year earlier.
The United States accounted for 42% of 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 (.HSI) fell 24% over the same period.
However, the shares have jumped 30% to five-month highs since the October filing on investor talks.
($1=7.7923 Hong Kong dollars)