Global Fairness Opinion

Sohu.com, China’s leading online media service, was planning the sale of 17173.com, its online game portal, to its subsidiary Changyou.com. Was the proposed transaction fair, from a financial point of view?

Sohu.com, China’s premier online brand, provides users with a wide array of information, communication and entertainment choices, including search engine www.sogou.com, online mapping service provider www.go2map.com and various other sites. Changyou.com, in which Sohu is a majority shareholder, develops and operates some of China’s most popular online games. To bring together its two leading gaming-related businesses, Sohu planned to sell its online gaming information portal, www.17173.com, to Changyou.

Per the transaction agreement, Changyou would acquire all of the assets associated with 17173.com for consideration of US$162.5 million. Various services and support agreements were also involved. Due to the transaction’s significance, as well as its status as a related-party transaction, both Changyou and Sohu wanted assurance of the transaction’s fairness, from a financial point of view. Thus, the Audit Committees of both companies sought third-party fairness opinions.

In early November, Sohu’s Audit Committee retained American Appraisal for fairness opinion services.  The client service team from American Appraisal’s China and US offices worked seamlessly to perform various analyses within the Audit Committee’s requested time frame.

On November 29, 2011, American Appraisal rendered its opinion to Sohu’s Audit Committee that the proposed transaction was fair, from a financial point of view; the firm retained by Changyou’s Audit Committee reached the same opinion. The transaction closed on December 15, 2011, and is expected to create synergies that, over the long term, will increase the value of both businesses.

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