Tencent leads Supercell deal for $8.6bn stake in gaming company
TENCENT Holdings will lead an $8.6 billion (R126bn) acquisition of Finnish gamemaker Supercell, getting its hands on the industry’s most popular mobile titles through potentially its largest overseas deal.
China’s largest internet company is leading a group that will buy 84 percent of Supercell, including shares held by SoftBank Group and current and former employees. The deal values Supercell at about $10.2bn and adds chart-toppers Clash of Clans and Hay Day to the Tencent portfolio.
Tencent, Baidu and Alibaba Group Holding are on an acquisition spree, seeking content and technology in their tug of war over the world’s largest internet population. The Supercell purchase may galvanise a wave of overseas deals as the trio’s ambitions expand beyond a slowing home market.
“The repeated success of Supercell makes it a perfect asset in the Tencent empire,” said SuperData Research chief executive Joost van Dreunen. “The market for mobile and online gaming is saturating and… has begun to consolidate.”
SoftBank rose 1.4 percent to ¥5 842 (R774) in Tokyo before the deal was announced. The shares have declined 4.8 percent this year. Tencent gained 1.3 percent in Hong Kong.
Tencent formed a consortium to take control of Supercell and began negotiations with “potential co-investors” to join that group. It expected to keep 50 percent voting rights in that group but would complete the acquisition on its own if necessary, it said. “We are excited that Supercell is joining our global network of game partners, and will preserve their independence,” Tencent president Martin Lau said.
Tencent’s multibilliondollar outlay is unusual for a firm that prefers strategic stakes in companies or smaller deals. At a $10bn valuation, Supercell’s price tag outstrips the $5.9bn Activision Blizzard agreed to pay for Candy Crush Saga studio King Digital Entertainment last year.
Supercell’s 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 Candy Crush to Clash of Clans. Supercell’s revenue surged 36 percent to €2.1bn (R35bn) last year.
The acquisition should help safeguard Tencent’s lead in gaming and content. Alibaba has also invested in gaming, including in US developer Kabam, but Tencent has the advantage of operating China’s most popular messaging services in QQ and WeChat.
“Tencent probably sees this as a reasonable price to pay because games are its most important business,” said Marie Sun, an analyst at Morningstar Investment Service. “With its vast distribution channels across QQ and WeChat, the company would have many ways to monetise the games.”
The sale would go a long way toward cleaning up SoftBank’s debt-laden balance sheet. It was part of Masayoshi Son’s effort to focus capital on promising startups.
Son built his corporate empire by borrowing heavily to finance acquisitions, transforming a computer software distributor into a global technology giant. He has seen the value of his firm shrink over the past two years as Sprint’s losses mounted, and SoftBank’s debt pile grew to a record ¥11.9 trillion. – Bloomberg