Chinese Internet giant Tencent is spending $8.6 billion for a majority stake in Clash of Clans game publisher Supercell, a move that will expand the popular mobile gaming franchise to more of Tencent”s massive user base.
Tencent is buying out another Internet giant, Japan”s SoftBank, which had held a 73% stake in Supercell. Tencent”s consortium will own about 84% of the mobile games maker, valued at $8.57 billion, the remainder of which will be owned by Supercell”s own employees. The deal values the Helsinki, Finland-based Supercell at about $10.2 billion.
The transaction is the seventh largest Chinese overseas acquisition on record, according to Dealogic — ChemChina”s pending $46.7 billion deal for Syngenta is the largest — and the second largest gaming deal behind Chongqing New Century Cruise”s $9.1 billion acquisition of Giant Interactive last year.
Already the world”s largest video game company by revenue, Tencent is now “a truly global company,” said Peter Warman, CEO of research firm Newzoo.
Tencent, valued at about $207 billion, is among the world”s largest Internet, social networking and online entertainment providers with hundreds of millions of users on its QQ and WeChat messaging networks and customers of its MyApp store.
Supercell is among the success stories in mobile gaming. More than 100 million daily play its top four games: Clash of Clans, Clash Royale, Boom Beach and Hay Day. At one point, Clash of Clans, which launched on iOS devices in 2012 and Android in 2013, was the top game on both mobile platforms. The game is an online multiplayer combat strategy game in which players build strongholds, defend them and join clans to attack others.
In 2015, Supercell generated about $2.3 billion in revenue, with earnings before interest, tax, depreciation and amortization (EBITDA) of $930 million, up 64% from 2014, according to Reuters. Helping drive revenue was Clash of Clans” release in China in 2015.
“Supercell is known for its creativity, focus on player experience, and unique culture, which have enabled it to create innovative mobile games that are wildly popular globally,” said Tencent President Martin Lau in a statement announcing the deal.
Supercell will remain an independent studio and its existing management will continue to run the operation, Lau said. “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,” he said.
SoftBank Chairman Mayayoshi Son had mentioned to Supercell CEO Ilkka Paananen that the company would be interested in finding a buyer for its stake in the company to finance its SoftBank 2.0 strategy, Paananen said on Supercell”s web site. SoftBank and Gung Ho Entertainment spent $1.5 billion for a 51% stake in the Supercell. Last year, SoftBank upped its stake to 73%.
Partnering with Tencent will give Supercell an even better avenue to China”s growing gaming market, Paananen said. “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,” he said.
Combined, the companies will generate about $13 billion in 2016, a 17% increase over 2015, Newzoo estimates, and take in about 13% of all world gaming revenue.
Just as Supercell seeks to get better access to the Chinese gaming market, so does the Shenzhen, China-headquartered Tencent Tencent aim for an expanded global reach. It does own the world”s most popular online game, League of Legends, an online multiplayer battle arena game played on Windows and Macintosh computers. And Tencent holds a 12% stake in Activision Blizzard; in 2015, it teamed with Activision to launch Call of Duty Online in China.
Last year, Tencent”s revenue from outside Asia amounted to $1.3 billion, or 15% of its total business, Newzoo”s Warman says. Aside from League of Legends, Tencent has been struggling to grow its revenues outside of China, especially on mobile, he said. Now, the company will likely double or triple its revenue from outside Asia.
Clash of Clans and more recent release Clash Royale, a card-based strategy game released in March 2016, currently hold Nos. 3 and 5 across all mobile devices on ThinkGaming”s U.S. top game charts. Combat strategy game Boom Beach is No. 15, while farming game Hay Day is No. 22.
In a video released earlier this year, Supercell said it had killed 14 other projects during the time it had developed its top four games.
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The deal”s total equity value of $10.2 billion dollars “recognizes the value of the phenomenal company that our people have built,” Paananen said.