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Tencent Says It's Buying UK Video Game Developer Sumo Group, Sending Shares Flying

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  • Tencent has agreed to acquire British video game developer Sumo Group for $1.26 billion.
  • Shares of Sumo skyrocketed more than 40% on news of the deal.
  • It marks the latest takeover of a U.K. video game firm by a foreign company.

LONDON — Tencent said Monday it has agreed to acquire British video game developer Sumo Group for £919 million ($1.26 billion).

The Chinese gaming giant is offering 513 pence a share for Sumo, a 43% premium to the company's Friday closing price. London-listed shares of Sumo skyrocketed more than 40% on news of the deal Monday.

Tencent already owns a 8.75% stake in Sumo, which mainly develops games for other publishers. Sumo's portfolio includes Sackboy: A Big Adventure, a title published by Sony, and several racing games based on Sega's Sonic the Hedgehog franchise.

Sumo, which was founded in 2003, has seen a number of shifts in ownership. It was acquired by now-defunct American video game firm Foundation 9 Entertainment in 2008, before being bought back by management in 2014. The company then floated on the London Stock Exchange in 2017.

"In the 18 years since we founded Sumo, we have developed more great games than we could ever have imagined and enjoyed incredible trust and support from our clients, enabling us to grow into a global business, delivering consistently strong financial results," said Carl Cavers, Sumo's CEO.

"Tencent intends to bring its expertise and resources to accelerate the growth of Sumo both in the U.K. and abroad, supporting Sumo in the market for top-tier creative talent, and the U.K. as a hub for game innovation," said James Mitchell, chief strategy officer at Tencent.

"We believe the proposed transaction benefits all stakeholders, and delivers compelling value for Sumo shareholders, while enhancing Sumo's capabilities for the future."

The all-cash acquisition marks the latest takeover of a U.K. video game firm by a foreign company. EA recently bought British racing game maker Codemasters for $1.2 billion, while Epic Games acquired Tonic Games Group, the studio behind Fall Guys, which became a mega hit during the early part of the Covid-19 pandemic.

Tencent, the world's largest video game publisher, has acquired stakes in several gaming companies. The company is the owner of League of Legends developer Riot Games and Finnish mobile games maker Supercell. It also holds a 40% stake in Epic Games, the company behind Fortnite.

Tencent has bought smaller stakes in a number of gaming companies as well, including French indie game developer Dontnod Entertainment, Swedish strategy game publisher Paradox Interactive and Czech firm Bohemia Interactive.

"Tencent has increased the pace of its investments and acquisitions over the past year, as it looks to strengthen its position and push into new growth areas for the company," said Daniel Ahmad, an analyst at Niko Partners.

"Tencent is acquiring Sumo Digital for its breadth of experiencing developing and operating AAA games and live service games, the majority of which are developed for clients such as Sony, Microsoft, Sega and others."

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