BREAKINGVIEWS – Razer’s $4.5 bln buyout plan has a serrated edge
19 November 2021 11:58
(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)
By Robyn Mak
HONG KONG, Nov 19 (Reuters Breakingviews) – Razer is reversing a familiar take-private playbook. In contrast to Chinese technology outfits that have decamped from New York to head closer to their home markets, the management of the Singaporean-American purveyor of pricey computer accessories may take the company private and swap ... its Hong Kong listing for one in New York.
Razer's $200 keyboards emblazoned with a neon green three-headed snake logo enjoy a cult following among hardcore gamers worldwide. The brand's popularity has swelled during the pandemic. Hardware sales, which include mice, laptops and chairs, surged
https://doc.irasia.com/listco/hk/razer/i...tpress.pdf 77% year-on-year in the six months to June, to $677 million. That helped turn a small profit, compared to a net loss last year.
Minority investors are less enthusiastic. The stock has fallen as much as three-quarters below its 2017 initial public offering price. One recent drag may the broader Chinese technology sell-off: Razer tracks the local Hang Seng Index more closely than it does its competitors, per HSBC analysts who estimate the company generates only a tenth of its sales from the People’s Republic.
The mooted HK$4 offer price is nearly double the stock's one-month average before Monday, when Reuters reported plans of the deal. It values the enterprise at $4 billion – or 2.6 times annualised 2021 sales. That's roughly in line with Swiss rival Logitech and far above U.S.-listed competitors Corsair and Turtle Beach . Chairman Min-Liang Tan and non-executive director Kaling Lim, own over 50%. To buy the rest, they’d have to pay over $2 billion. Extra support could come from CVC Capital and KKR , Reuters reports.
There are two potential advantages to going West. The company's top market is the United States, where retail investors are piling into so-called meme stocks like cinema chain AMC Entertainment . Razer's mostly young and American fanbase might provide a similar stock boost. Tan boasted in an interview that gamers were asking “daily” why the company doesn't trade in the United States. Razer's nascent Southeast Asian payments unit might fetch a higher valuation stateside too, after the expected listings of regional super-apps Grab and GoTo.
Beyond investment fads, though, any sustainable valuation gains may depend on maintaining its pandemic-level growth. Razer’s buyout plan has an edge but its not the sharpest one.