Tencent Holdings Ltd, one of China’s biggest internet giants is now reaching a deal with the developer of the game called Clash of Clans. This marks another big movement from the technology giant who tried to push the international business this year.
The company attracted the international capital market’s attention last time from the successful buyout of the company, Riot, who created one of the most popular online games known as, League of Legends. Clash of Clans is valued at more than $9 billion, said people familiar with the matter, and could make the Chinese internet giant a global powerhouse in the online mobile game industry.
Tencent is in late-stage talks with SoftBank Group Corp. to acquire the Japanese telecommunications maker’s majority stake in Supercell and is in discussions with several financial investors, including Hillhouse Capital Group, to join in the purchase as co-investors, officials said. The deal’s value was unclear, but people familiar with the situation said the company would be worth more than $9 billion.
A deal would be the Chinese firm’s largest to date. An agreement could be disclosed as early as next week, though it still faces hurdles, including efforts to put together a financing package.
SoftBank, which is looking to sell its Supercell stake to shore up its balance sheet, is saddled with more than $80 billion in net debt, about one-third of which is tied to its struggling U.S. mobile-carrier unit Sprint Corp. Last month, it said it would sell at least $7.9 billion of its shares of Chinese e-commerce giant, Alibaba Group Holding Ltd. to pare down some of that debt.
Supercell was valued at roughly $5.25 billion last year, according to a person familiar with the matter. SoftBank first bought a 51% stake in the Finnish gaming company for US$1.53 billion in 2013. Last year, SoftBank raised its stake to 73% but didn’t disclose the price of the transaction after Supercell’s shares outstanding received interest from a Chinese fund.
Any buyer of Supercell would have to agree to terms that give Supercell’s founders control over the company. The owner wouldn’t have the ability to force an initial public offering or exit later and wouldn’t be able to kick out the current management.
Supercell, which has offices in Finland, San Francisco, Tokyo, Seoul and Beijing, is very profitable. Last year, its net profit increased almost two-thirds to €693 million ($779.1 million), while revenue was €2.11 billion, compared with just €151,000 in 2011.
Tencent’s deal for Supercell would cement it as a global leader in personal-computer and mobile games. In 2011, Tencent bought a controlling stake in Los Angeles-based Riot Games Inc., maker of the hit combat game “League of Legends,” for about $230 million—a move that was widely seen as the Chinese company’s entrance onto the world stage of PC games. “League of Legends” was the world’s highest grossing PC game by revenue last year, earning $1.63 billion, according to research firm SuperData Research. At the same time, the world’s highest grossing mobile game by revenue was Supercell’s “Clash of Clans,” which grossed $1.35 billion, it said.
For Tencent, this buyout of the famous game developer shows nothing but both the abundant capital and global ambition. 9 billion deal from Tencent again claims China’s companies’ ability and willingness to reach out the international market.