Tencent in Talks With SoftBank to Buy Majority Stake in Game Firm Supercell
May 23 2016 - 4:20AM
Dow Jones News
HONG KONG—Chinese Internet major Tencent Holdings Ltd. is in
talks with SoftBank Group Corp. to buy the Japanese
telecommunications giant's majority stake in Supercell Oy, the
Finland-based maker of some of the world's most popular mobile
games, according to people briefed on the discussions.
Tencent's talks with SoftBank are still at an early stage,
according to the people, and it isn't clear whether SoftBank is
currently in talks with other parties.
SoftBank bought a 51% stake in Supercell--maker of the farm
simulator game "Hay Day" and combat simulator "Clash of Clans"--
for $1.53 billion in 2013. The Japanese company last year raised
its stake to 73%, but didn't disclose how much it paid. A person
familiar with both transactions said the Finnish games company was
valued at around $5.25 billion last year.
Last fall, Chinese online-game developer Giant Interactive Group
teamed up with Alibaba Group Holding Ltd. and held talks with
SoftBank and Supercell over an acquisition, people familiar with
the matter said. While Alibaba and Giant are still interested,
price has been a sticking point, said one person familiar with the
negotiations.
One person briefed on the matter said Tencent President Martin
Lau and Chief Strategy Officer James Mitchell recently flew to
Helsinki to persuade Supercell's founders to support a sale. But
Supercell's founders, who can veto the deal, prefer to keep the
company's management under SoftBank given it gets complete
autonomy, some of the people said.
Tencent, Supercell, SoftBank, Alibaba and Giant declined to
comment.
SoftBank is Alibaba's largest shareholder and Alibaba's founder,
Jack Ma, sits on SoftBank's board.
A potential tie-up between Tencent and Supercell would alter the
industry landscape by creating a dominant global games publisher
offering some of the world's highest-grossing games for both mobile
phones and personal computers. This year, revenue from mobile games
is expected surpass games played on PCs and consoles for the first
time, according to research firm Newzoo.
Supercell was founded in 2010 by several members of the Finnish
games industry and makes only four titles: "Hay Day," "Clash of
Clans," "Boom Beach" and "Clash Royale." The company's mobile games
are free to download, and Supercell makes money by selling virtual
goods that enhance the players' game experiences.
Supercell's earnings have ballooned as its games--some of which
pit cartoon depictions of knights and mustachioed barbarians
against goblins and dragons--have dominated revenue and download
charts. Its most recent game, "Clash Royale," released in March,
became the world's top-grossing mobile game for that month,
generating revenue of more than $80 million, according to
Newzoo.
Tencent is already a global leader in PC games thanks to its
wholly owned U.S. unit, Riot Games, maker of the popular combat
game "League of Legends." But for mobile games, Tencent is still
trying to beef up its overseas profile through alliances and
acquisitions. Last year, it bought minority stakes in U.S.
mobile-game publishers Glu Mobile Inc. and Pocket Gems Inc. Tencent
has been assembling a war chest for potential acquisitions and is
raising about $4 billion for a bank loan, people familiar with the
matter said earlier this month.
SoftBank's portfolio of video-game companies is one area that is
under scrutiny from company President Nikesh Arora, who in March
was put in charge of its international investments and operations,
a person familiar with the matter said. Any sale of such assets
would help shore up SoftBank's balance sheet, which is saddled with
more than $80 billion in net interest-bearing debt, about a third
of which is tied to its struggling U.S. mobile carrier unit Sprint
Corp.
--Alexander Martin in Tokyo and Matthias Verbergt in Stockholm
contributed to this article.
Write to Wayne Ma at wayne.ma@wsj.com and Juro Osawa at
juro.osawa@wsj.com
(END) Dow Jones Newswires
May 23, 2016 04:05 ET (08:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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