SoftBank said on Tuesday that they had reached an agreement to sell their 72.2 percent stake in Supercell to Tencent Holdings Ltd. RTTNEWS.COM reports that SoftBank shares were sold for $7.3 billion.
Supercell headquartered in Finland, became SoftBank’s subsidiary in 2013. This deal values Supercell at $10.2 billion.
Reuters reports that Tencent will acquire in total about 84.3 percent of Supercell via a wholly-owned consortium, in a deal valued at roughly $8.6 billion. The sale includes all of SoftBank’s 72.2 percent stake. The sale is the biggest ever deal in gaming Mergers and Acquisition.
Tencent with a market value of about $211 billion, dwarfs Supercell. Tencent’s trophy asset is WeChat the popular messaging service in China, it also owns a number of online multiplayer games in China hosted through its QQ portal.
App Annie records Tencent has having 392 games and is consistently ranked second behind Supercell for top grossing apps. Supercell achieving this feat with only a handful of games.
Purchasing a majority shareholding in Supercell would promote Tencent to the premier mobile game producer. It is already China’s dominant online game company, accounting for about 32 percent of revenue from the country’s online game market in 2015, according to Niko Partners.
Tencent is also the owner or have a significant shareholding in a number of other game developers:
- Riot Games: Owns 100% of the maker of League of Legends, a huge hit on PC.
- Activision Blizzard: 12% ownership of the producer of Call of Duty
- Epic Games: 48.5% ownership
- Glu Mobile Inc: 15 percent stake in mobile game developer
Tencent’s tentacles are spreading wide, but what is this likely to mean for Clash of Clans?
Tencent drives much of their gaming through their messaging app WeChat and social media platform QQ. This will benefit Supercell in driving Clash of Clans sales in China.
China continues to be one of the weakest market for Clash of Clans, where it lags behind many of Tencent’s games.
Tencent is also at the forefront of eSports, with Supercell likely to benefit from this know-how and general exposure to eSports world, an area being pursued by Supercell.
It’s unclear if Ilkka Paananen, the CEO of Supercell supports this deal. Paananen had earlier ruled out an IPO for Supercell. “Why would we consider an IPO?” he said. “We’re only 190 people. We’re small and highly creative. That’s not the best fit for the public markets which are all about the next quarter’s results”.
It’s uncertain how creative and independent Supercell will be under the control of Tencent. Only time will tell. This deal may increase gross profit for Supercell’s titles, but will it also give Supercell the freedom to fail.
Ilkka Paananen, Supercell CEO provides the following statement regarding the Tencent acquisition of Supercell majority stake