ByteDance CMGE in talks to buy stake in mobile games company: Sources

China’s Bytdance mobile games publisher CMGE is in talks to buy into the technology, four people with direct knowledge of the subject told Reuters that the short video app TikTalk is moving to strengthen its next growth pillar.

The deal comes as profits from the gaming industry continue to rise COVID-19 The pandemic countermeasures, which forced people to stay at home, boosted game downloads.

Bite Dance CMGE Chairman Xiao Xian and Vice Chairman Sin Hendrick said two people were planning to buy part or all of CMGE’s 27.6 percent stake in Fairview Ridge Investments.

Another person said that HKD5 (about Rs. 50) was looking to offer HKD4 (approximately Rs. 40) to BitDance share to buy the stake. The range represents a 30 per cent to 62 per cent premium over the stock HKD 3.08 (approximately Rs. 30) on Monday.

Following the news, CMGE reversed stock losses and rose 21 per cent to 3.75 (approximately Rs. 35) in mid-October trade, the highest since mid-October.

Xiao and Xin are the largest shareholders in Hong Kong-listed CMGE, owned by several companies at 33.9 percent and 32.6 percent, respectively, according to regulatory filings.

Reuters figures for 27.6 per cent of the stock valued at $ 275 million (approximately Rs 2,000 crore) and $ 997 million (approximately Rs 7,400 crore) based on CMGE market capitalization.

Three people have identified eight years of byte dance gaming as its next strategic growth area and have been scouting for investment opportunities for months to build its gaming portfolio.

Sector pioneer Tensent In August, Leu Technologies proposed a $ 1.5 billion (approximately Rs 11,100 crore) acquisition. It targeted CMGE byte dance, two people said.

One of the people said that a successful transaction can make BitDance CMGE’s largest shareholder. This Agreement has not yet been finalized and is subject to change.

People refused to identify because the information was not public. ByteDance or CMGE did not respond to requests for comment. Reuters did not reach Fairview for comment.

ByteDance has already been successful with casual mobile games that mainly make money through advertising. It plans to release its first “hardcore” game in the April-June quarter, according to two other people.

Hardcore games are a steady source of revenue because users have been playing popular titles for years and are ready to buy in-app for game-enhancing items such as weapons.

CMGE has the second largest intellectual property reserves among Chinese game companies after Tencent and counts The Legend of Sword and Fairy and Juan-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.

BiteDance entered gaming in early 2019 with casual titles. By the end of last year, its 13 games were successful Of Apple App Store in China. It has a games division with over 2,000 employees working on hardcore games.

© Thomson Reuters 2020

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