Sumo Group shares soar as Tencent swoops with GBP919mln deal for Sheffield video game studio

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Sumo Group PLC (LON:SUMO) shares jolted some 40% in Monday’s early deal as Tencent is to takeover the company is a deal that values the Sheffield headquartered video gaming firm at GBP919mln.


Tencent, the Chinese company behind Fortnite owner Epic Games, is a massive acquirer of Western entertainment and culture businesses – with influential stakes in music, movies, TV and video games.


It already owns some 8.75% of Sumo and it has now offered 513p per share, a 43% premium to Friday’s close, to acquire all of the London-listed firm which provides game development and technical outsourcing to larger studios and game publishers.


Analysts do not expect any rival bids or resistance from shareholders. It already has irrevocable undertaking in favour of the deal representing some 27% of Sumo shares, plus its own 8.75% stake.


“The opportunity to work with Tencent is one we just couldn’t miss,” said Sumo chief executive Carl Cavers.


“It would bring another dimension to Sumo, presenting opportunities for us to truly stamp our mark on this amazing industry, in ways which have previously been out-of-reach.”


“Tencent has a strong track record for backing management teams and their existing strategies.


“Alongside the acceleration of Own-IP work, Tencent has demonstrated its commitment to backing our client work and has stated its intention to ensure that we have the necessary investment to continue focusing on work with our key strategic partners on turn-key and co-development projects.”


Cavers, who currently holds 3% of the company’s shares, is backing the Tencent offer alongside his fellow members of the board, which are recommending the offer to shareholders.


Tencent is on a tear in the gaming industry in the wake of the pandemic which saw huge spikes in user and activity volumes amidst lockdowns. It has invested in more than 60 different companies in 2021 to date.


The Chinese tech and media conglomerate’s key asset in gaming is its 40% stake in Fortnite publisher Epic – which also owns the Unreal gaming engine used by many third-party developers as well as the Epic Games Store. Nevertheless, Tencent has full or influential ownership stakes. It owns League of Legends publisher Riot Games, along with stakes in Ubisoft and Activision Blizzard.


Tencent also owns China’s equivalent to Steam, the PC gaming platform and marketplace.


Altogether Tencent is estimated to be the second largest video games company by revenue, behind only Playstation parent Sony.


Outside of gaming, it owns China’s WeChat app and the Huya and DouYu video streaming apps.


In music, it owns stakes in Warner Music Group, Sony, and Universal Music Group.

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