Chinese supergiant Tencent has acquired UK-based games developer Sumo Group for £919 million. Tencent is well known for its active acquisition spree in the market for a long time. This deal will add another feather to the cap of Tencent. The Chinese conglomerate has over 18 prominent gaming ownerships in various companies across the world. The deal with Sumo Group was made possible by a hefty amount of $1.27 billion or £919 million. This acquisition by Tencent further strengthened its hold over the European gaming market. Tencent is already the biggest gaming company in the world in terms of revenue collection. So naturally, they are looking for more opportunities to invest or acquire other gaming firms. This deal with the Sumo group was finalized in July.
Tencent controls a large part of the Chinese market thanks to its ownership of the popular chat and social media app WeChat. It is widely used across the Chinese market for a variety of purposes. For example, WeChat is known to facilitate many daily activities ranging from gaming to social media chatting and gaming. Thus with its control over the popular Wechat domain, Tencent can easily access the Chinese market and establish its dominance over the Asian gaming market. In addition, Tencent shares a large amount of ownership in several gaming companies and esports organizations.
Tencent owns a large part of the popular games developing platform Riot Games. Riot Games is famous for one of the most popular esports hits – League of Legends. Tencent also has a substantial stake in Fortnite’s famous Epic Games. Recently Tencent has also acquired Finland-based Supercell who is otherwise known as the creator of Clash of Clans.
In 2021 alone, Tencent has completed over 10 investment deals in various video game companies. However, there was initially some concern regarding the takeover of the Sumo Group by Tencent. Many were anticipating whether the UK government would interfere in the deal. People have also noticed the UK government’s dilemma to allow Chinese takeovers in the British market in the past. But the acquisition of the Sumo Group went without any hitch. There were no objections from the British government.
About Sumo Group
Sumo Group is the parent and holding company of the popular British games developing studio Sumo Digital. It was first set up way back in 2003. Back then, the main intent was to provide developers for hire who can be contacted for work by other companies. So naturally, Sumo started by working on parts and bits of games that other companies launched. Soon, it was acquired by Foundation 9 Entertainment in March 2008. However, that move didn’t last long. In November 2014, Cavers, Porter, Mills, and Chris Stockwell initiated a management buyout of the entire studio. As a result, Sumo shifted from its original way of work to developing full games on its own.
In the past, Sumo had worked on popular gaming titles including Sonic, the hedgehog games from Sega. It has also developed a part of LittleBigPlanet by Sony and Hitman by IO Interactive. In 2017, Sumo was listed on the London Stock Exchange’s Alternative Market. Sumo currently has over 1200 employees from different parts of the world including the UK, Poland, Canada, India, and the US. Sumo Group’s chief executive and Co-Founder Carl Cavers said about the acquisition- “The Opportunity to work with Tencent is one we couldn’t miss. It would bring another dimension to Sumo, presenting opportunities for us to truly stamp our mark on this amazing industry, in ways which have previously been out of reach.”
About The Deal
Tencent has proposed a deal of £919 to Sumo Group for its takeover. The deal includes several facilities and promises by Tencent. Tencent has offered to give Sumo 513p per share in cash. This deal was indeed lucrative as the amount is much larger than Sumo’s existing share prices. It is actually at a 43% premium on Sumo’s closing share price on Friday. The closing share price of Sumo Group on Friday was 358p. This was before the deal was announced. However, after the announcement of the deal, Sumo’s share prices went up to 499p, soaring by 40%. Back in 2019, Tencent acquired 9% of the company. Now Tencent has received a thumbs up from the existing shareholders of Sumo group regarding the takeover.
Sumo has primarily agreed to this deal because of various reasons. One of the primary reasons behind this take-over agreement is to benefit from Tencent’s far and wide market reach. Directors at Sumo Group are excited to utilize this market potential to their advantage. According to them, this deal will allow them to showcase their skill and potential to parts of the gaming market that were otherwise inaccessible to them before. And all of this will be made possible by the acquisition by Tencent. This deal is also backed by Perwyn, who owns a 17% stake in Sumo. The main deal is going to be conducted through Tencent’s subsidiary Six Joy Hong Kong.
Positives about the Deal
The deal is surely going to strengthen the relationships between the European market and the Chinese gaming market. After the lifting of pandemic house rules, the gaming market noticed a minor fall. This was because people had started to venture out in the open after long confinement at home. This deal is anticipated to boost the gaming market. Although slow, this boost can steadily lift the market and help it reach its full potential. There is a noticeable 15% rise in video game spending in the US alone.
This growth is sure to reflect in other parts of the globe as well. With this acquisition, Tencent has now actively engaged itself in the European Gaming market. It will try to exert its influence on market control in Asia and the US to assert dominance in the European scene. In addition to that, Sumo Group is also about to receive a large boost of gaming accessories and connections to help its course of projects.