Tencent Weighing Supercell Deal at $9 Billion Valuation

Tencent Said to Weigh Deal With Supercell
  • SoftBank is selling assets to strengthen its balance sheet
  • China’s Tencent is expanding its investments in games

Tencent Holdings Ltd. is discussing the purchase of SoftBank Group Corp.’s majority stake in Supercell Oy in a deal that may value the Finnish gamemaker at $9 billion, higher than previously thought, according to people familiar with the matter.

The talks are at an early stage and the acquisition may still fall apart, said the people, asking not to be identified because the matter is private. SoftBank acquired a majority interest in Helsinki-based Supercell for about $1.5 billion in 2013, and increased that to 73 percent last year. Bloomberg News reported last month that SoftBank was considering a sale of Supercell, which makes Clash of Clans and other mobile games, and that the deal would value the company at more than $5 billion.

Tencent operates China’s most popular messaging services and has been expanding its games business. Japan’s SoftBank has decided that games aren’t a core part of its business and has already agreed to sell shares in GungHo Online Entertainment Inc. SoftBank is selling more than $10 billion in assets to strengthen its balance sheet and focus on investments in promising startups.

“The assets sales are a positive move, considering that Son is positioning his company as a venture investor,” said Tomoaki Kawasaki, an analyst at Iwai Cosmo Securities Co. “That money could be used for various things, from paying down debt to new acquisitions.”

SoftBank shares recovered after falling as much as 2.2 percent and closed little changed at 6,104 yen in Tokyo trading. Tencent’s stock didn’t trade in Hong Kong because of a public holiday.

The Supercell valuation being discussed may change as the negotiations continue, the people said. Tencent and SoftBank still need to complete due diligence and the price could be adjusted or they could fail to reach final terms, they said.

A spokesman for SoftBank declined to comment. A spokeswoman for Tencent also declined to comment.

Supercell’s games, including Clash of Clans and Boom Beach, are free to download and the company earns money from selling digital goods. Its sales increased 36 percent to 2.1 billion euros ($2.4 billion) in 2015.

Tencent already gets more than half of its revenue from games and a deal for Supercell would expand its reach in the industry. The Chinese company develops its own games and has invested in developers such as Riot Games Inc. and Glu Mobile Inc., the San Francisco-based company that has produced smartphone games featuring Kim Kardashian and Katy Perry.

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