Tencent is in early discussions with SoftBank (covered by Tetsuro Tsusaka) to acquire a 73% stake in Supercell Oy in a deal that may value the Finnish gamemaker at US$9bn, higher than the previous estimate of US$5-5.25bn Supercell is one of the most successful game developers globally with games such as Clash Royale, Clash of Clans, Boom Beach and Hay Day. According to NewZoo, over 50% of Clash Royale iOS revenue came from the US and China.
Based on Softbank's disclosure, Supercell generated revenue and operating profits of US2.3bn and US$508mn, respectively, in FYE March 2015. Softbank did not provide financial disclosure for Supercell's F16 financials. On a proforma basis, Supercell would represent 18% of Tencent revenue (or 32% of Tencent gaming revenue)
It focuses more on market expansion by introduction of new game genres, sourcing from both in-house and external game studios, in the growing mobile game market. In the MMO genre, it is open to working with competitors in the PC game area such as Shanda, Giant, Perfect World, Kingsoft and Changyou as it sees synergies between its distribution capabilities and their content franchises
China's State Administration of Press and Publication, Radio, Film and Television (SAPPRFT) has issued a notice stating that from July 1, mobile games must receive SAPPRFT pre-approval at least 20 business days before they launch, and those that have not secured approval will not be allowed to be released or operated online. A strong domestic gaming company like Tencent is well positioned to be a partner of choice for foreign developers given its ability to meet regulatory approval, localize game play, provide insight into Chinese gamers and lower distribution costs, in our view.
