Chinese internet giant Tencent has snapped up Sheffield-based UK games developer Sumo. Tencent is pursuing an expansionist drive that has already put it as the second-largest video game group in terms of revenue just behind Sony. The deal announced by Tencent is valued at $1.27 billion and will continue to push the Chinese company to the summit of global video games production and sales.

Tencent recently came under scrutiny in China after it sought to merge two video streaming sites DouYu and Huya. The Chinese market regulator blocked the move on possible breach of the country’s antitrust laws. Tencent has also had a very successful run with a number of its video games, some of which have high-profile mobile versions, like Call of Duty.

The company has several chart-topping video games that continue to drive the growth of its portfolio. The purchase is bound to boost Tencent’s global outlook, as it would add several of Sumo’s highly successful video games to its repertoire. Sumo has 14 studios spread across five countries, where it develops its video games.

Tencent holds an 8.75% stake in Sumo, and it is the second-largest shareholder of the company. Sumo had continued on a rising trajectory since 2017 when it was listed on the London Stock Exchange. The gaming provider’s shareholders will enjoy some impressive buyback of their shares in the deal with Tencent. Each share of Sumo has now appreciated 43% from its previous valuation, and a premium of $5.13 per share will be paid to shareholders of Sumo.

The move by Tencent is the second major deal involving a UK company after Electronics Arts (EA) snapped Codemaster within the past year. There has not been any report of a counteroffer at this time; hence it is unlikely that the deal would crumble. However, there could be some level of uncertainty in the regulatory regime of the company, due to the risks and uncertainties in the Chinese regulatory regime.

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(source)

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