Tencent Holdings is nearing a $6.6bn deal to buy a majority stake in Finland’s Supercell, a person familiar with the matter said, in what would be the biggest-ever purchase of a mobile games maker.
China’s biggest social network and online entertainment company plans to buy the 73.2% stake in Supercell from Japanese media and telecoms company SoftBank Group Corp, valuing the maker of the popular mobile game ‘Clash of Clans’ at more than $9bn, the person said, declining to be identified because the matter was confidential.
Analysts said through the deal, Tencent could enhance research and development capability and boost revenue in the world’s largest mobile gaming market.
China’s mobile gaming revenue is likely to grow 17% this year to 60bn yuan ($9.11bn), accounting for nearly a quarter of the world’s total, according to market researcher TrendForce.
Known for investing in game developers through partnerships and minority stakes, Tencent owns ‘League of Legends’ developer Riot Games and has a stake in Activision Blizzard Inc, the owner of the ‘Call of Duty’ franchise.
Last year, it bought a 15% stake in mobile game developer Glu Mobile, which developed the ‘Deer Hunter’ and ‘Kim Kardashian: Hollywood’ games, for $126mn in a move to expand in the US gaming market.
Tencent’s purchase of Supercell would surpass the previous record gaming acquisition in November, when Blizzard paid $5.9bn for ‘Candy Crush Saga’ creator King Digital Entertainment.
“Tencent has weaker research and development capability and such a deal could help enhance it,” said senior director of TrendForce Jeter Teo.
With Supercell’s popular games, the deal could boost Tencent’s mobile gaming revenue and attract more gamers to the company’s ecosystem such as messaging app WeChat and social media platform QQ, said Marie Sun at Morningstar.
Online gaming has long been Tencent’s main cash cow.
The company reported a 43% revenue rise in the first quarter, aided by growth in its gaming and advertising businesses.
The company has enough funds for its latest acquisition.
It had $8.6bn in cash and cash equivalents and $2.9bn in borrowings at the end of the first quarter.
Just last week, it completed a $4.44bn loan with 20 banks.
Tencent, which is in late-stage talks with SoftBank, is in discussions with several financial investors, including Hillhouse Capital Group, to join in the purchase as co-investors, the Wall Street Journal reported on Wednesday, citing people familiar with the matter.
An agreement could be disclosed as early as next week, the report said.
Tencent and SoftBank declined to comment, while officials at Supercell were not immediately available to comment.
A deal with Tencent will also mark the third major asset reshuffle by SoftBank in less than a month.
The Japanese media and telecoms company announced a plan earlier this month to sell $10bn worth of shares in Chinese e-commerce giant Alibaba Group Holding to cut debt, as well as a decision to sell its stake in GungHo Online Entertainment Inc back to the mobile game maker for ¥73bn ($691mn).
SoftBank expects to book a profit of ¥200bn to ¥250bn ($1.89bn to $2.36bn) this financial year from the Alibaba share sale, which will reduce its stake in the Chinese firm to around 27% from 32.2%.
SoftBank said last year it had increased its controlling stake in Supercell to 73.2%, without disclosing financial details.
Together with GungHo it had bought a majority stake in the mobile games maker in 2013 for about $1.5bn.