Weekly News Digest #29

Tencent Announces Two Acquisitions: Sumo Group And Stunlock Studios

Last week, Chinese video gaming giant Tencent announced two M&A deals, entering an agreement to acquire UK-based video game developer Sumo Group for approximately $1.26B* and buying a majority stake in Sweden-based PC&Console game developer Stunlock Studios for an undisclosed amount.

Tencent + Sumo Group
Sumo and Tencent already have some story behind: back in 2019, Tencent purchased an 8.75% stake in the developer. Now the companies will solidify their relationship with what is so far the largest gaming deal of the second half of the year. Based on Sumo Group’s financial performance in 2020 ($94.74m Revenue and $22.69m adj. EBITDA) the multiplies for the deal are 13.4x EV/Rev’20 and 55.7x EV/Adj. EBITDA’20. Sumo shareholders will get $6.93 in cash per share and a 43% premium to the last price.

Tencent actually buys several gaming companies, because since 2017 Sumo Group has acquired 7 studios, with the largest deal being the $99.5m acquisition of Pipeworks. Sumo’s most recent game is a multiplayer action video game Hood: Outlaws & Legends, which was released in May’21 on PC, PS4/PS5, Xbox One, and Xbox Series X/S. In 2020, Sumo Group either launched or announced 12 games in total, including such Own-IP games as Little Orpheus, WST Snooker, and Spyder. Now Tencent resources will help scale the potential performance of Sumo future games.

Tencent + Stunlock
Founded in 2010, Stunlock is best known for its free-to-play MOBA Battlerite, which has a very positive rating based on 57.3k reviews in Steam. Since its launch in 2017, the game has gathered 6.5 million players. Currently, the studio is working on the vampire survival game V Rising.

After the acquisition, Stunlock Studio will see no changes to its business structure and continue creating games with Tencent’s support. The studio hopes to use Tencent’s resources to help with future projects as well as realize their vision for V Rising, which is currently in development.

*The calculation is based on GDP/USD=1.375 exchange rate

Written by Andrei Zubov

 MERGERS & ACQUISITIONS

US-based Epic Games acquires US-based 3D content marketplace Sketchfab for an undisclosed amount. Sketchfab’s store fees are now reduced from 30% to 12%. The platform also plans for integration with more creation tools, now that it’s integrated with ArtStation and RealityCapture.

US-based Unity Technologies acquires Data Visualization, the creator of SpeedTree, a suite of environment creation products. The acquisition enables deeper integration of SpeedTree into the Unity ecosystem and allows a better solution to bring environments to the engine.

US-based tabletop game creator Exploding Kittens acquires card game Happy Salmon from North Star Games for an undisclosed sum. The game will be re-released in Nov’21 after being reimagined with Exploding-Kittens in mind.

VENTURE FINANCING

US-based free-to-play games publisher Tilting Point raises $235m in its first-ever equity financing. The funding, led by General Atlantic, will be used to establish new partnerships, acquire more studios and continue the global expansion.

US-based mobile games company Scopely has invested $50m in European mobile game studios: Spain-based Omnidrone and UK-based Pixel Toys and Tag Games. The studios are collaborating with Scopely on a number of yet-to-be-announced titles across multiple genres.

UK-based venture capital firm Hiro Capital leads a $10m round of Germany-based game developer Keen Games. The investment will go towards the studio’s new multiplayer sandbox action RPG. The new title is considered a spiritual successor to Keen Games’ Portal Knights, which sold over 3.5M copies.

PUBLIC OFFERINGS

US-based mobile game studio Jam City, Inc. and special purpose acquisition company DPCM Capital have mutually agreed to terminate the business combination agreement announced in May’21, which may also put the M&A deal with Ludia on hold. DPCM Capital is currently evaluating alternative business combinations.