China’s Tencent agrees to buy UK video games firm Sumo for more than £900m

Guardian Technology 19 Jul 2021 09:26

China’s Tencent has agreed to buy the British video games developer Sumo Group at a valuation of more than £900m, further expanding the tech company’s presence in the global video games market.

Sumo’s board has agreed to Tencent’s offer of 513p a share, valuing the London-listed company at £919m, it announced on Monday.

The price represented a premium of about 43% on Sheffield-based Sumo’s closing share price of 358p on Friday, before the deal was announced, and was also much higher than its all-time high of 407p. Shares soared by 40% on Monday, to 499p.

Tencent said it had received pledges to back the takeover from the holders of 27% of Sumo’s shares, plus its own holding of almost 9%.

Tencent is one of the biggest companies in the world, thanks to its control of the Weixin/WeChat social media app, which is used across China for chat and mobile payments, as well as gaming.

It also controls large video game and esports interests, in a market that is expected to grow rapidly after a hiatus in 2021 caused by the coronavirus pandemic. That includes ownership of Riot Games, the developer of the wildly popular League of Legends franchise, plus stakes in other games developers including Epic Games, the maker of the Fortnite series, and Finland’s Supercell, the maker of the mobile game Clash of Clans.

The global market for video games is expected to falter during 2021 after bumper growth in 2020, when locked-down consumers turned to games. Demand was boosted further last year by the release of Sony’s PlayStation 5 and Microsoft’s Xbox Series X/S. Forecasts by Newzoo, a games data company, in May suggested that global games revenues will dip by 1.1% in 2021 to $176bn (£128bn). However, they expect the market to resume its otherwise unbroken annual growth to reach $200bn in sales by 2023.

Sumo was set up in 2003 as a developer for hire, working on parts of other companies’ games. Eventually it took control of developing entire games, with past titles including Sonic the Hedgehog games for Sega, LittleBigPlanet for Sony, and Hitman in collaboration with IO Interactive.

Carl Cavers, Sumo’s chief executive and co-founder, said: “The opportunity to work with Tencent is one we just 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.”

The Sumo deal would be the second acquisition worth more than £900m of a British games developer after the US company Electronic Arts bought Codemasters for £945m in February.

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