Kingnet, a major Chinese game company that fought Wemade (112040) in court for nearly a decade over the intellectual property rights to "The Legend of Mir," is joining the consortium set to become Wemade's largest shareholder. The shift from courtroom adversary to major shareholder marks a turning point for Wemade's business in China.
Wemade and Neopulse said in a joint statement on the 14th that "an investor consortium made up of Neopulse, a game-focused investment platform, and Kingnet, among others, signed a share purchase agreement with Wemade Chairman Park Kwan-ho on June 30." The two sides plan to complete the transaction, including the balance payment and regulatory approvals, by Oct. 30. Once the deal closes, the consortium will hold a 40.25% stake in Wemade as its largest shareholder.
Until now, speculation that a Chinese company was behind the acquisition circulated without confirmation, because Neopulse had not disclosed how it would finance the purchase of Park's 39.33% stake for 920 billion won. Neopulse's ownership structure, recently confirmed through a Chinese stock market filing, shows that Kingnet is taking part in the deal by acquiring a 49% stake in Neosphere for $298 million, or about 400 billion won, through its Hong Kong subsidiary Cypress Technology HK. The remaining 51% is held by Nexpulse, a company owned by an individual investor in Hong Kong. Neosphere is the top-level entity that owns 100% of Neopulse through Hong Kong-based Sungsong Investment. Kingnet is effectively the key investor and is expected to wield considerable influence over Wemade's management.
Kingnet's involvement draws attention because of the two companies' long history of conflict. They started out as business partners, jointly operating "The Legend of Mir 2" in China. The relationship turned into a legal battle after Zhejiang Huanyu, a Kingnet subsidiary, unilaterally stopped paying royalties in 2016 for "Nanyue Legend," a game based on "The Legend of Mir 2." After pursuing litigation in Chinese courts for nearly 10 years, Wemade received a settlement of 109.84 million yuan, or about 43 billion won, from Kingnet in April this year.
With the relationship transformed, Wemade's China operations will inevitably be restructured. Industry watchers expect Kingnet to develop sequels built around Mir, a popular IP in the Chinese market, with Wemade using that as a bridgehead to lift its revenue in China.
The two companies said they "plan to focus on expanding opportunities in the global and Chinese markets after completing the share transaction, including publishing and core IP licensing businesses." They also agreed to build a joint framework for responding to risks in the Chinese market. Wemade said that "even after the change in largest shareholder, the core businesses currently under way and the operation of the organization will continue as originally planned."
