rose 38% on Monday, after the UK-based game maker said it had agreed to be bought by the Hong Kong tech group
in an all-cash transaction worth approximately Â£ 919 million ($ 1.26 billion).
The UK-based gamemaker’s stock surge stood out on an otherwise gloomy market day, as concerns of the Covid-19 resurgence spread around the world. In a statement, Sumo said
would buy all the shares it did not already own in the company through its subsidiary Sixjoy Hong Kong Limited for 513 pence each.
Shares of the maker of “Sackboy: A Big Adventure” and “Hotshot Racing” climbed to 496 pence in London, with the deal representing a 43.3% premium over Sumo’s closing price on Friday, July 16. Tencent previously held a 10% stake. in the company from an agreement in 2019.
âThe opportunity to work with Tencent is one we just couldn’t miss. It would bring another dimension to sumo, providing opportunities for us to really make our mark on this incredible industry in a way that was previously beyond reach, âSump CEO Carl Cavers said in a statement.
The UK has been a ripe hunting ground for gambling offerings.
outbid rival Take-Two Interactive Software, buying car racing game group Codemasters in a $ 1.2 billion deal struck in February. Epic Games acquired UK-based “Fall Guys” maker Tonic Games in March.
“With a very powerful bonus that enhances the company [Sumo] on one of the most generous multiples in this space, we believe Tencent’s offer is at a level that investors will be hard-pressed not to accept; also, management and 33% of shareholders (in issued capital) are in support, âsaid a team of analysts from Berenberg led by Benjamin May.
May noted that M&A activity in the first quarter of 2021 has increased, with $ 39 billion in gaming space deals reported. âSumo is a rare asset as it is a pure-play developer (almost). For most publishers, that would be a very expensive way to hire 1000 experienced developers because they don’t own any significant intellectual property. [intellectual property] on its own, âMay said.
Used to mergers and acquisitions, Tencent owns dozens of stakes in foreign game companies. Its game park includes the American company Riot Games, the maker of âLeague of Legendsâ, the Norwegian company Funcom, and has a 40% stake in Epic Games.
âTo tech giants who are looking for content (eg.
), it would be a fast lane to integrate a large studio but a slow lane to add content to their platforms (because development would take years and a lot more capital), âsaid May. “We also believe that the valuation implied by Tencent’s offer is too rich to attract counterbids from corporate and / or private equity buyers.”
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