Tencent Is Spending Billions On This Hit Game Firm

June 21, 2016, 9:41 AM UTC
Tencent Holdings Ltd. Chairman And Chief Executive Officer Ma Huateng Attends Annual Earnings Conference
Photograph by Xaume Olleros—Bloomberg via Getty Images

China’s Tencent (TCEHY) is set to make a very large investment in gaming, after striking a deal worth over $8 billion to take over Finland’s Supercell, the maker of the hit game Clash of Clans.

According to the Wall Street Journal, Tencent and co-investors will buy SoftBank’s (SFTBY) share in Supercell in stages, allowing it to make an initial purchase with its existing funds.

Supercell was only worth $5.25 billion last year, but the new deal, in which a Tencent-led consortium will own an 84 percent stake, will value it at $10.2 billion.

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Debt-laden SoftBank has a 73 percent stake in Supercell, which is a hugely profitable operation with games—including Clash of Clans, Hay Day and Boom Beach—that are doing very well in Asian markets.

“Our decision to divest our shares is driven by our continued focus on monetization for the benefit of our shareholders and on capital structure discipline,” said SoftBank CEO Masayoshi Son.

The Finnish games company’s 2015 revenues totalled €2.11 billion ($2.39 billion), which was up 36 percent year-on-year, and its profits for the year were €848 million.

“We want Supercell to be the world’s best place for creative people to create games,” said Supercell CEO Ilkka Paananen. “At the same time, this new partnership offers us exciting growth opportunities in China, where we will be able to reach hundreds of millions of new gamers via Tencent’s channels.”

Tencent already holds a majority stake in Los Angeles-based Riot Games, which produces the hit game League of Legends. However, Tencent only spent a little over $230 million in that 2011 deal—its Supercell investment will be far heftier.

For more on Riot Games, watch our video.

“We are excited that Supercell is joining our global network of game partners, and will preserve their independence and enhance their advantages, thus bringing even more exciting gaming experiences to players around the world,” said Tencent president Martin Lau.

“It is important to us that Supercell stays true to its roots by sustaining its unique culture, continuing to be headquartered in Finland, and representing its home proudly.”

This article was updated with further details as they emerged.

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