Tencent Holdings Ltd (騰訊) is to lead a US$8.6 billion acquisition of game maker Supercell Oy, getting its hands on some of the industry’s most popular mobile titles through potentially its largest-ever overseas deal.
China’s largest internet company is leading a group that is to buy 84 percent of Supercell, including shares held by Softbank Group Corp, as well as current and former employees. The deal values the Finnish gaming house at about US$10.2 billion and adds chart-toppers Clash of Clans and Hay Day to a Tencent portfolio that dominates the Chinese social media scene, but made few waves abroad.
Tencent, Baidu Inc (百度) and Alibaba Group Holding Ltd (阿里巴巴) have embarked on an acquisition spree, seeking content and technology in their tug-of-war over the world’s largest Internet population. Alibaba’s also invested in gaming, including in US developer Kabam Inc, but Tencent has the advantage of operating China’s most popular messaging services in QQ and WeChat.
“The repeated success of Supercell makes it a perfect asset in the Tencent empire,” said Joost van Dreunen, CEO of SuperData Research, a New York-based market researcher. “The market for mobile and online gaming is saturating and, unsurprisingly, has begun to consolidate. Digitalization triggered the evolution of the games industry into a worldwide market governed by titans.”
Tencent formed a consortium to take control of Supercell and has begun negotiations with “potential coinvestors” to join that group. It expects to eventually keep 50 percent voting rights in that group, but will complete the acquisition on its own if necessary, it said in a statement.
Tencent, which is to distribute Supercell’s games in China, believes that the deal will grant it much wider access to the global mobile gaming market and open up future opportunities for collaboration with other developers.
“We are excited that Supercell is joining our global network of game partners, and will preserve their independence and enhance their advantages,” Tencent president Martin Lau (劉熾平) said in the statement.
Tencent already gets more than half its revenue from games, many designed in-house, and has invested in League of Legends developer Riot Games Inc and Glu Mobile Inc, the San Francisco-based studio known for smartphone titles featuring Kim Kardashian and Katy Perry.
The deal values Supercell at just more than four times last year’s revenue, close to its publicly traded peers. Supercell’s revenue surged 36 percent to 2.1 billion euros (US$2.37 billion) last year.
Supercell’s mobile games employ a “freemium” model where apps cost nothing to download, but users can buy perks or special items to gain an edge. That approach has created a string of successes from King’s Candy Crush to Clash of Clans, a mobile battle-strategy game that is consistently among the top grossing.
Supercell CEO Ilkka Paananen said on a conference call that remaining independent was very important to a Finnish gaming outfit that in 2010 scrabbled for used desks to fill a one-room office in Espoo. Success came later with Clash of Clans, where users raise barbarian armies, and crop-tending simulation Hay Day. Its games are now played by more than 100 million people each day, Paananen said on Tuesday.
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