Tencent eyes mobile gaming growth in acquisition of Finnish developer Supercell for US$8.6 billion

Tencent Holdings, China’s largest internet company, is poised to ratchet up its international video games business with its acquisition of Finnish mobile game developer Supercell Oy for an estimated US$8.6 billion.

The deal would mark the single biggest investment in a video games company by Tencent, which owns significant stakes in United States-based developers Riot Games, Epic Games, Glu Mobile and Activision Blizzard, as well as South Korean firm CJ Games and Japanese company Aiming.

In a filing with the Hong Kong stock exchange after the close of trading on Tuesday, Tencent chairman and chief executive Pony Ma Huateng said the company has agreed to form a consortium that will buy up to an 84.3 per cent stake in Supercell from owner SoftBank Group Corp and certain Supercell shareholders.

The transaction, which is expected to close in the third quarter, valued Supercell at about US$10.2 billion.

Tencent will provide between US$3 billion to US$4 billion of the purchase price, while the remaining balance will be financed by investments from potential co-investors in the consortium and certain bank borrowings. The total consideration will be payable in three instalments.

Ma said Tencent, which expects to retain a 50 per cent voting interest in the consortium after the deal is closed, has also entered into marketing and co-operation agreements with privately held Supercell for the distribution of its games in mainland China.

Founded in 2010, Supercell has brought four top-grossing games to market on both Apple’s iOS and Google’s Android platforms. Those include Hay Day, Clash of Clans, Boom Beach and Clash Royale, which Supercell estimated as being played by more than 100 million people every day.