UPDATE: Tencent Is Close To Acquiring Leyou For +$1.3B Estimated Valuation
? Acquisition
Chinese gaming giant Tencent (SEHK: 700) is getting close to acquire Hong Kong-based game developer and distributor Leyou Technologies (HKG: 01089), though the agreement is still yet to be announced
On July 10, 2020, the companies agreed on three months of exclusive M&A talks. If the deal happens, it could be over $1.3b, since the current market value of Leyou is about $1.2b and there might be some premium to the current market price
Leyou’s major shareholder with a 52% stake in the company Charles Yuk plans to sell all his shares by the end of December 2020
Anonymous sources say that companies discuss an offer price in the range of $0.43 to $0.44 per Leyou share
Among many bidders interested in Leyou acquisition, were Sony and two companies backed by Tencent: iDreamSky Technology Holdings and Zhejiang Century Huatong Group, as well as some other private equity firms
? Products
Leyou owns several game studios, such as Digital Extremes, Splash Damage, Kingmaker and Radiance Games
Digital Extremes has developed multiplayer shooter Warframe
The game has about 50m registered users
In the first half of 2020, Warframe saw a 15.5% growth of registered players
Leyou’s Splash Damage studio has worked with Microsoft on “Gears Tactics” game, that came out this April on PC and gained generally positive reviews
Currently, Leyou finishes the work on a multiplayer combat game Outcasters, developed specially for Google Stadia. The game is planed to be released this fall
? Financial Performance
In 2019, Leyou reported $214.2m Revenue (-5.9% YoY growth) and $8.4m Loss
Suprisingly, the company revenue for the first half of 2020 accounted for $90.7m, demonstrating a 14.2% decrease compared to the the first half of 2019 ($105.7m). According to the Leyou, the main reasons for such decrease were COVID-19 impact and shutdown of the company’s overseas studios
? Company Ownership
The largest shareholder of Leyou is Yuk Kwok Cheung holding ~52% of all shares
SOURCES: BLOOMBERG, PCGAMEINSIDER
