Changyou, which has a portfolio of mobile and computer games including Tian Long Ba Bu, began as a business unit of Sohu.com in 2003 and was later separated.

Sohu said it intends to fund the deal primarily through debt.

Under the agreement, Sohu will pay $10.8 for each Changyou American Depositary Share (ADS), which represents a premium of 82.4% to the closing price of Changyou ADS on Sept. 6, the last trading day prior to Sohu's proposal to take the company private.

Sohu, which provides multiple news and information services on mobile platforms including a news app and mobile news portal m.sohu.com, expects to close the deal in the second quarter of this year.

China Renaissance is serving as financial adviser to the Sohu Group for the deal.

(Reporting by Manojna Maddipatla in Bengaluru; Editing by Shailesh Kuber and Vinay Dwivedi)