Tencent is discussing the purchase of SoftBank Group’s majority stake in Supercell in a deal that may value the Finnish game maker at USD $9 billion, higher than previously thought, according to people familiar with the matter.
The talks are at an early stage and the acquisition might still fall apart, said the people, asking not to be identified. SoftBank acquired a majority interest in Helsinki-based Supercell for about USD 1.5 billion in 2013, and increased that to 73% 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 USD 5 billion.
Tencent operates China’s most popular messaging services and has been expanding its games business. Japan’s SoftBank has decided that games are not a core part of its business and has already agreed to sell shares in GungHo Online Entertainment. SoftBank is selling more than USD 10 billion in assets to strengthen its balance sheet and focus on investments in promising start-ups.
“The assets sales are a positive move, considering that (Softbank CEO Masayoshi) Son is positioning his company as a venture investor,” said Tomoaki Kawasaki, an analyst at Iwai Cosmo Securities. “That money could be used for various things, from paying down debt to new acquisitions.”
The Supercell valuation being discussed might 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. 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% to € 2.1 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 and Glu Mobile, the San Francisco-based company that has produced smartphone games featuring Kim Kardashian and Katy Perry.