Talks between iDreamSky Technology Holdings and CVC Capital Partners to jointly acquire a Hong Kong-listed video games company have stalled, as the Covid-19 pandemic roils financial markets, according to people familiar with the matter. Although the suitors had lowered their offer for Leyou Technologies Holdings in recent weeks, the coronavirus outbreak has affected negotiations between iDreamSky and CVC over valuations as well as due diligence, the people said. The new proposal valued Leyou at US$1.2 billion, down from an initial US$1.4 billion, said the people, who asked not to be identified as the discussions are private. iDreamSky, which counts Tencent Holdings among its investors, remains committed to the takeover and is seeking other co-investors to join the deal, the people said. As credit markets tighten, iDreamsky is turning to Chinese lenders for financing, the people said. Video gaming boom hides struggle to create new hits in isolation No final decision has been made, and iDreamSky and CVC could still decide to go ahead with their planned deal, the people said. A representative for iDreamSky declined to comment, saying the company will provide the latest progress on the stock exchange in a timely manner. A representative for CVC declined to comment, while a representative for Leyou did not immediately respond to requests seeking comment. Shares of Leyou rose 1.4 per cent in Hong Kong on Wednesday, giving the gaming firm a valuation of about HK$6.7 billion (US$871 million). Shares of iDreamSky fell 2 per cent. iDreamSky has been in talks with Leyou’s controlling shareholder Charles Yuk Kwok-cheung and other selling holders since late last year. CVC later joined iDreamSky in the takeover bid, Bloomberg News reported in February. Meet the coder-turned-entrepreneur who introduced Angry Birds to China In the initial proposal, Shenzhen-based iDreamSky planned to hold a majority stake after it combined with Leyou, while CVC was set to hold a significant minority stake in the merged entity, the people familiar with the matter have said. The prospective buyers would retain Leyou’s biggest hits, including free shooting game Warframe , and would consider selling some of its games under development and physical studios to help fund the acquisition, the people said at that time.