The move allows Sumo to continue expanding and could help Tencent avoid unwanted attention from regulators.
Chinese media giant Tencent has acquired Sackboy developer Sumo Group PLC, Reuters reported, spending $1.27 billion on the remaining 91.25% of the Sheffield-based company not already held by the Shenzhen tech firm. The acquisition is the latest among dozens of Tencent’s recent purchases in a bid for the company to expand in the Western market and work around antitrust legislation in China.
However, it also helps further Sumo’s expansion plans, including work with new studios such as the recently-announced Timbre Games.
“The three founders of Sumo, who work in the business, Paul Porter, Darren Mills and I are passionate about what we do and are fully committed to continuing in our roles,” Sumo CEO Carl Carvers said in a statement obtained by GamesIndustry.biz. “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.”
Tencent’s Chief Strategy Officer James Mitchell said in the statement the acquisition reaffirms the company’s commitment to supporting the most talented projects and delivering excellence to the games industry. It’s been carrying out this strategy since 2019 when it first invested in Sumo and well into 2021.
“Tencent has invested in or acquired 62 gaming related companies in H1 2021, which is double the amount for the entirety of 2020 and 6x that of 2019’s total,” Niko Partners senior analyst Daniel Ahmad said on LinkedIn. “Tencent has increased the pace of its investments and acquisitions over the past year, as it looks to strengthen its position and push into new growth areas for the company.”
Reuters said that from a revenue perspective, Tencent is the second largest video game company in the world, behind only Sony. Ahmad said Tencent likely found Sumo’s work with major developers such as Microsoft and Sony highly desirable.
“The deal would also help Sumo utilize Tencent’s expertise in regard to games development and publishing within China,” he said.
Recent events show the company needs to look outside itself and its currently-held firms to continue that expansion as well. One week before the Sumo acquisition, Nikkei Asia reported the Chinese State Administration for Market Regulation denied Tencent’s bid to merge game streaming companies Huya and DouYou.
Chinese authorities cited antitrust laws and concern over how much control over upstream and downstream markets the merger would bring Tencent, which owns 40% of Huya and 30% of DouYou already.
Nikkei Asia speculated Tencent was trying to capitalize on streaming’s growing popularity and profitability in China, but the government’s action isn’t limited to just streaming. Nikkei reported “growing concern” in the country with Tencent’s 40% control over the games industry there.
The Chinese Anti-Monopoly Law gives the government license to restrict international mergers and operations depending on a number of factors, including profit turnover amounts in China. With the Administration of Market Regulation already eyeing Tencent warily, focusing on acquisitions such as the Sumo deal and Tencent’s purchase of Stockholm-based Stunlock Studios announced the same day may be the safer way forward for now. These give Tencent chances to work directly in AAA game development, as Ahmad said, in addition to strong footholds in other sectors without attracting too much unwanted attention from the national government.
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