Tencent to acquire UK games developer Sumo for over US$1.2 billion

Tencent has agreed to buy British video games developer Sumo Group, continuing its international acquisition of gaming companies worldwide. 

In a statement from Sumo Group, the deal is priced at £919 million (US$1.26 billion). Tencent’s offer of 513p per share in cash, via its subsidiary Sixjoy Hong Kong, represented a premium of about 43% on Sumo Group's closing share price of 358p on Friday before the deal was announced, and was also much higher than its all-time high of 407p.

If the deal is approved by shareholders, this latest transaction will be another example of UK-based games developer being purchased by foreign buyers. For example, in February, California-based video game company Electronic Arts closed its £945m (US$1.29 billion) acquisition of British video game developer and publisher Codemasters, according to Financial Times

Tencent took a minority stake in Sumo in November 2019, which is now worth 8.75% of the company. Currently, the Chinese tech giant's portfolio of games companies includes Supercell, the Finnish makers of Clash of Clans, and US-based League of Legends developer Riot Games, as well as minority stakes in Activision Blizzard, Epic Games, Voodoo, Frontier Developments and Ubisoft.

"Tencent intends to bring its expertise and resources to accelerate the growth of Sumo both in the UK and abroad, supporting Sumo in the market for top- tier creative talent, and the UK as a hub for game innovation. We believe the proposed transaction benefits all stakeholders, and delivers compelling value for Sumo shareholders, while enhancing Sumo’s capabilities for the future," said James Mitchell, chief strategy officer and senior executive vice president of Tencent.

Tencent's latest acquisition comes at a time when its acquisition have been under scrutiny from Chinese regulators as China curbs the expansion of home-grown tech companies. Earlier this month, it was reported that China blocked Tencent's merger of the top two videogame streaming sites, Huya and DouYu. This came as Tencent failed to produce remedies to meet the State Administration of Market Regulation's (SAMR) requirements on giving up exclusive rights.

Tencent also withdrew its merger application for antitrust review as it was unable to complete a resubmission within 180 days after submitting the application for the first time. The news of the merger of Huya and DouYu emerged last year. Currently, Tencent owns a 36.9% stake in Huya and more than 33% in DouYu. The two platforms hold the top two positions in China’s video gaming streaming industry, and is a popular destination for esports tournaments streaming and professional gamers.

Meanwhile, Tencent Cloud has also inked a deal with Japanese livestreaming app Yell Live to beef up online influencers’ livestreams and fan interactions. The collaboration serves to address the exponential growth of influencer livestreaming in relation to eCommerce globally.

Sumo was set up in 2003. Currently, it employs more than 1,200 people across 14 locations in the UK, Poland, Canada, India and the US. Tencent first bought shares in Sumo in November 2019.

“In the 18 years since we founded Sumo, we have developed more great games than we could ever have imagined and enjoyed incredible trust and support from our clients, enabling us to grow into a global business, delivering consistently strong financial results," said Carl Cavers, chief executive officer of Sumo.

"Sumo will continue to work with clients to break new ground and create even more fantastic games. We look forward to strengthening our growth prospects through the application of Tencent’s strategic resources to our Own-IP, turn-key development work ambitions, and possible acquisition opportunities," he added. 

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