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UPDATE: Tencent Is Close To Acquiring Leyou For +$1.3B Estimated Valuation

M&A | ANNOUNCEMENT DATE: 24 AUG 2020
WRITTEN BY | 26 Aug 2020
UPDATE: Tencent Is Close To Acquiring Leyou For +$1.3B Estimated Valuation
M&A

💵 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

UPDATE: Tencent Is close to acquiring Leyou
  • 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

The largest shareholder of Leyou is Yuk Kwok Cheung holding ~52% of all shares

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M&A
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M&A
Leyou Technologies Holdings
  • Established in 1998

  • Headquarters — Hong Kong, China

  • Founded by Alex Xu

  • Team of 1,000+ employees

  • Video game developer, publisher and distributor

  • Annual Revenue’19 is $214m with EBITDA margin of ~23%

  • Latest annual report

Tencent
  • Established in 1998

  • Headquarters — Shenzhen, China

  • Team of 60 000+ employees

  • Founded by —  Pony Ma (Ma Huateng), Zhang Zhidong, Xu Chenye, Chen Yidan and Zeng Liqing

  • Global conglomerate specializing on games, internet-related services and technologies

  • 2020 interim report, 2019 annual report