Tencent Holdings Ltd. is in exclusive talks to acquire Digital Extremes owner Leyou Technologies and take it private. This news has come in just after a report last week stating that Sony was considering a bid for Leyou.
Leyou Technologies is the holding company that owns “WarFrame” developer Digital Extremes and “Gear Tactics” developer Splash Damage. It had temporarily ceased trading on Hong Kong Limited Stock Exchange ahead of the announcement of this buyout.
Since last year, Charles Yuk, the controlling shareholder for Leyou had been in talks with Tencent backed iDreamSky Technology Holding Ltd. for a majority stake sale. In May, Leyou confirmed that it received another non-binding offer from Zhenjiang Century Huatong Group Co., a Shenzhen listed gaming firm. Tencent is also a shareholder with the Zhenjiang Century Huatong Group.
Leyou and its controlling shareholder, Charles Yuk’s exclusivity agreement with Tencent Mobility Ltd
Leyou stated last Friday, that Tencent Mobility, a subsidiary of the Chinese tech giant, has entered into an exclusivity agreement with the Hong Kong-listed games developer, Leyou for privatization. The exclusivity agreement is valid for three months.
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With the onset of an exclusive agreement, Leyou and Yuk will not be able to work with any other potential buyer for the next three months while its talks with Tencent are in progress.
In its announcement, Leyou said although the talks with Tencent have commenced, there is no certainty that they would lead to a binding deal.
Leyou’s temporarily ceased trading before announcement, has begun again from July 13
As per Piers Harding-Rolls, head of games research at Ampere Analysis, Leyou had originally started as a food processing company but then had later diverted to the gaming industry which resulted in the buyout of developers like Digital Extremes and Splash Damage. He stated that Leyou was looking for a new buyer because its game Warframe suffered in 2019 due to a slow update cycle and new competition.
With the firm halting trading before the takeover announcement, it has begun trading again from July 13. Leyou has a market value of over $1.1 billion.
Tencent’s aggressive expansion strategy
Tencent has been increasing its games portfolio for the past few years with big stakes in Epic, Supercell, Fatshark, Funcom, Grinding Gear Games, Paradox Interactive, and Riot which is completely owned by Tencent. In some of the recent additions, it has also made investments in PUBG’s Bluehole, Ubisoft, Activision, and Frontier.
Meanwhile, Leyou has also announced its plans to launch a game based on “The Lord of the Rings” franchise and is co-developing it with Amazon’s gaming division.