- Video game developer Sumo has reached a takeover agreement with Chinese tech giant Tencent
- The deal values the company at a 43 per cent premium to its closing price on the last business day before the announcement
Sumo (SUMO) has reached a takeover agreement with Chinese tech giant Tencent (HK:800) in an all-cash deal that values the video game developer at £919m.
Tencent has agreed to pay 513p a share, representing a 43 per cent premium to Sumo’s closing price on the last business day before the announcement. The board intends to recommend that shareholders accept the offer, which chief executive Carl Cavers believes will allow the company to “stamp [its] mark” on the industry in “ways which have previously been out-of-reach”.
This is the second time in less than a year that a foreign business has scooped up a London-listed video games developer after a bidding war for Codemasters eventually resulted in a £945m takeover by Electronic Arts (US:EA) that closed in February.
But Tencent’s offer, unlike Take-Two Interactive’s (US:TTWO) initial bid for Codemasters at a meagre 11 per cent premium, does look appealing. The company has been an investor in Sumo since 2019, and currently holds an 8.75 per cent stake in the business. Its size, experience and pre-existing relationship with Sumo should mean that it makes a reliable parent.
However, it does face challenges in its domestic market, as Beijing moves to curb the power of its tech giants. Just two weeks ago China’s market regulator vetoed the merger of two US-listed Tencent video game units, DouYu and Huya, which have a combined market value of $5.3bn.
