Picture: REUTERS/TINGSHU WANG
Picture: REUTERS/TINGSHU WANG

Tencent has agreed to buy the rest of Sumo Group it does not already own, adding to a string of gaming investments by Chinese social media and gaming giant. The shares jumped the most on record.

Asia’s most valuable firm is offering 513p per share for Sumo, a 43% premium to the British company’s previous close. On a fully diluted basis, the offer values Sumo at about `£919m. Tencent had previously purchased a 9.96% stake in Sumo in 2019.

Tencent is the world’s largest gaming company, with stakes in giants such as Riot Games and Epic Games. The company has said it plans to plough a larger portion of its incremental profits this year into cloud services, games and video content, to fend off competition from the likes of ByteDance and growing scrutiny from Beijing.

The shares jumped 42% to 509p at 8.29am after earlier jumping as much as 45%, its biggest intraday gain.

Sumo creates games for other publishers, including for Apple’s Arcade service. Other clients and partners include Xbox Game Studios, Electronic Arts, Activision Blizzard and Ubisoft Entertainment, according to its website.

“The business will benefit from Tencent’s broad videogaming ecosystem, proven industry expertise and its strategic resources, which will help secure and further the aspirations and long-term success of Sumo,” Ian Livingstone, nonexecutive chair of Sumo, said in a statement.

The Tencent-Sumo deal follows the sale of one of Britain’s oldest games studios, Codemasters, which Electronic Arts bought for $1.2bn in December, beating out a rival bid from Take-Two Interactive Software.

Still, it comes amid UK lawmakers urging government to rethink its open-door approach to foreign takeovers. Chinese investors are increasingly backing the businesses emerging from UK universities, and some of Britain’s biggest technology companies are now owned by firms headquartered in China or Japan.

Sumo is a success story for its home city of Sheffield, in the north of England, and another sign that software could help replace steel. Sheffield once had the moniker Steel City when the UK was making nearly half of the world’s supply of the metal. But now China accounts for half, and Britain almost none.

Sumo’s current headquarters are nestled on a riverbank between a 250 year-old steel foundry, Sheffield Forgemasters, and the Meadowhall shopping mall, where locals two years ago sheltered overnight after flooding devastated the region.

Prosus, of course, holds a nearly 29% stake in Tencent; Naspers, in turn, owns 73% of Prosus. 

Bloomberg News. More stories like this are available on bloomberg.com

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