The Hong Kong tech group, Tencent Holdings, announced plans to buy Sumo Group, a UK-based games maker. It is an all-cash deal that is worth around $1.26 billion. Tencent will be buying all the shares of Sumo Group that it does not own through its subsidiary, Sixjoy Hong Kong Limited, for 513 pence each.
UK based game makers shine
In what seems to be a tomato day for investors, UK based games makers enjoy the shine. In particular, the Sumo Group blast higher on Monday. The deal is so lucrative that it might deter competitors from challenging Tencent offers, given that it is a rich premium of 43% compared to Sumo’s closing price on Friday, 16 July.
Hence, it seems that the investors of Sumo have no reason to reject the juicy deal.
A win-win situation for Tencent and Sumo
For Sumo, it will be a stamp of confirmation in the gaming industry and perhaps into the Chinese market that has been almost out of reach to the company. It is not a stranger move for Tencent as it has stakes in dozens of foreign game companies. Tencent has an investment in Riot Games that makes “League of Legends”, and it also holds about 40% shares in Epic Games.
Since the onset of the pandemic, content creation has been a valuable asset. Games production is one of such classes. Many investors see Sumo as a rare gem, for it is a pure-play developer essentially. Imagine having to bring onboard thousand of experienced developers, it will be a talent acquisition nightmare. The ecosystem embedded in Sumo further support the growing appetite for M&A in the region.
The deal presents a fantastic diversification opportunity for the gaming arm of Tencent as it moves out beyond its stronghold market- China.
The hunger for deals in the UK gaming industry
The UK has been a fertile ground for gaming deals. In February, we saw how Electronic Arts had outbid its rival Take-Two Interactive Software to buy Codemasters, a car racing games group, for $1.2 billion.
Epic Games also purchased Tonic Games, which made the famous game “Fall Guys” based in the UK in March.
The latest move to acquire Sumo shows a vibrant gaming industry growing and glowing on the backdrop of an ongoing pandemic recovery phase.
The chase for content is vast and endless. We can expect more tech giants to take an express route through acquisition to add content to their platforms since internal developments of such content will take years and intensive capital.
Till then, we await the US market today!
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