ByteDance in talks to buy stake in mobile games firm CMGE -sources
22/12/2020 05:37
* ByteDance looking to offer HK$4-5/share for stake -source
* Could become single largest shareholder of CMGE -source
* Sees gaming as next strategic growth area
By Julie Zhu and Yingzhi Yang
HONG KONG/BEIJING, Dec 22 (Reuters) - China's ByteDance is
in talks to buy into mobile games publisher CMGE Technology
Group Ltd 0302.HK , four people with direct knowledge of the
matter told Reuters, as the owner of short video app TikTok
moves to strengthen its next pillar of growth.
The deal would come as the gaming industry continues to
benefit from COVID-19 pandemic countermeasures which have forced
people to stay at home, boosting game downloads.
ByteDance plans to buy part or all of the 27.6% CMGE stake
held by Fairview Ridge Investment Ltd, controlled by CMGE
chairman Xiao Jian and vice chairman Sin Hendrick, said two of
the people.
ByteDance is looking to offer HK$4 to HK$5 ($0.52 to $0.64)
per share to purchase the stake, said another person. The range
represents a premium of 30% to 62% above the stock's Monday
close of HK$3.08.
Xiao and Sin are the biggest shareholders of Hong
Kong-listed CMGE, holding 33.9% and 32.6% respectively through a
number of entities, regulatory filings showed.
A 27.6% stake is worth $275 million, Reuters calculations
showed based on CMGE's market capitalisation of $997 million on
Monday.
Eight-year-old ByteDance has identified gaming as its next
strategic growth area and has been scouting for investment
opportunities for months to build up its gaming portfolio, three
of the people said. urn:newsml:reuters.com:*:nL8N2AE0J8
Market leader Tencent Holdings Ltd 0700.HK proposed a $1.5
billion acquisition of Leyou Technologies Holdings Ltd 1089.HK
in August. That made CMGE more of a target for ByteDance, said
two of the people.
A successful transaction could make ByteDance CMGE's single
largest shareholder, said one of the people. The deal is yet to
be finalised and is subject to change, the person said.
The people declined to be identified as the information is
not public. Neither ByteDance nor CMGE responded to requests for
comment. Reuters could not reach Fairview for comment.
ByteDance has already been relatively successful with casual
mobile games that mainly make money through advertising. It
plans to release its first "hardcore" game in the April-June
quarter, said two other people with knowledge of the matter.
Hardcore games can be a steady source of revenue as users
tend to keep playing popular titles for years and are willing to
make in-app purchase for items that enhance game play, such as
weapons.
CMGE boasts the second-largest intellectual property
reserves among Chinese games firms after Tencent, and counts
"The Legend of Sword and Fairy" and "Xuan-Yuan Sword" in its
portfolio. It has exclusive licensing agreements with ByteDance
for two titles - "The King of Fighters: All Stars" and "One
Piece: The Voyage".
ByteDance entered gaming in early 2019 with casual titles.
By the end of last year, 13 of its games had became hits on
Apple Inc's AAPL.O App Store in China. It has a games division
with around 2,000 employees working on hardcore games.
(Reporting by Julie Zhu in Hong Kong and Yingzhi Yang in
Beijing; Editing by Anshuman Daga and Christopher Cushing)
((Yingzhi.Yang@thomsonreuters.com;))