Tencent Holdings is nearing a deal to acquire Chinese gaming handset maker Black Shark, a move that could help the tech behemoth further its ambitions for the metaverse, people with knowledge of the matter said.

Tencent has begun talks to buy Black Shark, a niche maker of gaming phones and accessories, according to the people, asking not to be identified as the information hasn’t been made public. The smaller firm, whose investors include Xiaomi , will pivot to making virtual reality headsets for its new parent after the deal, one of the people said. 

Representatives for Tencent, Black Shark and Xiaomi didn’t immediately respond to requests for comment. The potential acquisition was previously reported by local trade publication 36Kr.

Alongside global giants such as Facebook owner Meta Platforms, China’s largest tech firm is a contender in the race to develop the metaverse, conceived as a virtual environment where people can interact with the internet and others. In a recent earnings call, Tencent president Martin Lau called the metaverse “a real opportunity” though he cautioned that the concept may take longer than expected to bring into reality.

Developing specialised hardware is one of the key pillars to realising the metaverse. Meta was one of the earliest movers, buying VR headset maker Oculus in 2014, while top Chinese rival ByteDance last year purchased Pico, a domestic VR headset maker.

Black Shark, a little-known start-up that calls its users members of the “Rebellion,” sells its stylised phones as well as a plethora of accessories such as controllers in China, Europe and India. Last year, Tencent collaborated with Black Shark on a gaming phone that optimises effects for the former’s flagship title Peacekeeper Elite.  

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