ByteDance in talks about shopping for a stake within the cell video games firm CMGE: Reuters sources

© Reuters. FILE PHOTO: The ByteDance logo can be seen in this image

By Julie Zhu and Yingzhi Yang

HONG KONG / BEIJING (Reuters) – China’s ByteDance is in talks to acquire a stake in mobile game publisher CMGE Technology Group Ltd, four people with direct knowledge told Reuters as the short video app owner TikTok strengthens its next pillar of growth .

The deal would come as the gaming industry continues to benefit from the COVID-19 pandemic countermeasures that have forced people to stay at home, which increases game downloads.

ByteDance plans to buy some or all of Fairview Ridge Investment Ltd’s 27.6% stake in CMGE, which is controlled by CMGE chairman Xiao Jian and vice chairman Sin Hendrick, two respondents said.

ByteDance would like to offer HK $ 4 to HK $ 5 ($ 0.52 to $ 0.64) per share to buy the stake, another person said. The range represents a premium of 30% to 62% over the stock’s Monday close of HK $ 3.08.

Xiao and Sin are the largest shareholders in Hong Kong-listed CMGE, holding 33.9% and 32.6% respectively through a number of companies.

A 27.6% stake is worth $ 275 million, Reuters calculations showed, based on CMGE’s market capitalization of $ 997 million on Monday.

Eight-year-old ByteDance identified gaming as the next strategic growth area and has been looking for investment opportunities for months to build its gaming portfolio, three of those surveyed said.

Market leader Tencent Holdings (OTC 🙂 Ltd proposed in August to acquire Leyou Technologies Holdings Ltd for USD 1.5 billion. That made CMGE more of a target for ByteDance, said two of the people.

A successful transaction could make ByteDance CMGE the largest single shareholder, said one respondent. The deal has yet to be finalized and is subject to change, the person said.

The people refused to be identified because the information is not public. Neither ByteDance nor CMGE responded to requests for comments. Reuters could not reach Fairview for comment.

ByteDance has been relatively successful with casual mobile games that are mostly commercial-making. Its first “hardcore” game is scheduled to be released in the April-June quarter, said two other people aware of the matter.

Hardcore gaming can be a steady source of income as users tend to play titles that have been popular for years and are willing to make in-app purchases for items that improve the game, such as: B. Arms.

CMGE has the second largest intellectual property reserves of any Chinese game company after Tencent and has “The Legend of Sword and Fairy” and “Xuan-Yuan Sword” in its portfolio. There are exclusive license 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 his hit games were in the Apple Inc (NASDAQ 🙂 App Store in China. There is a games department with around 2,000 employees working on hardcore games.

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