The9 Limited (NASDAQ:NCTY) surged 33% on Friday but ended 3% higher following the announcement that the company had entered a definitive agreement through its subsidiaries with Keppel Corporation’s (OTCMKTS:KPELY) subsidiary Kapler Pte Ltd.
Kapler to Acquire The9 Limited Assets
According to the agreement, Kapler will acquire a 100% equity interest in The9 Limited’s subsidiaries in China. The subsidiaries include The9 Computer Technology Consulting, The9 Interactive as well as collectively held Zhangjiang Micro-electronic Port Block 3.
The terms of the agreement indicate that Kapler will in exchange pay around $69.19 million for the assets. The deal is however subject to payment schedules and customary closing terms. The transaction will free cash that The9 Limited will use in repaying specific senior secured convertible notes issued and sold in late 2015.
This strategic transaction is very vital to the company because although the company is offloading these assets they are not significant to the company operations and they are still valuable. With the sale of the assets, the company is still in a position to move forward with the remaining assets. Therefore the company sought an immediate way of improving its cash position by disposing those assets and maintaining the core assets to its operations.
Proceeds From Transaction To Settle The Debt
The sale of the assets comes in handy for the company whose senior secured notes issued at the end of 2015 have lingered of its head for quite some time now. The debt was expensive pushing the company to the edge. With the deal, the company will now have the cash to settle the debt because if the debt becomes a burden it more likely that the company will close shop. Settling the debt gives the company a strong financial footing that will help it create growth opportunities if the company gets to implement the right strategies.
The transaction provides a huge sum of money even if there are costs involved in the deal. The $69 million will be enough to settle the debt and although there won’t be much left, the balance could be enough to improve The9 Limited’s balance sheet.
