Tencent has just confirmed that it is acquiring a 14.6 percent stake in Glu Mobile, a mobile game developer based in San Francisco. Tencent will buy 21 million shares at $6 apiece, making the total investment $126 million.
Tencent, the second-largest Internet company in Asia, is also the world's top publicly traded company based on game revenue, according to research firm Newzoo. In 2014, the company earned $7.2 billion, more than Sony, which earned a record $6.04 billion and Microsoft, which made $5.02 billion.
Glu Mobile is a world-leading free-to-play game developer and publisher for smartphones and tablets. The company is more popularly known for the hit game app Kim Kardashian: Hollywood, which ranked as the second most-downloaded free game on the App Store. The game earned $29.3 million in sales or 38 percent of the total revenue for the company during the fourth quarter.
On Wednesday, the company reported a better-than-expected profit, which it earned consecutively for the past eight quarters. Other games that also became hits include Contract Killer: Sniper, Deer Hunter 2014 and Racing Rivals.
"Tencent was attracted to Glu due to its five-year growth track record, high-quality entrepreneurial management, and unique approach to methodically building a portfolio of success in the shooter, action-RPG, narrative-RPG, time-management, sports and racing genres," said Steven Ma, SVP and Head of Tencent's Interactive Entertainment Group.
The deal immediately earned approval from investors, which resulted in an increase of 24 percent in Glu Mobile shares during Wednesday's extended trading. The company is in talks of launching a mobile game that features pop star Britney Spears, which will be available in the first half of 2016. The exclusive deal is expected to last five years and could be extended for another three.
Glu Mobile also confirmed a five-year deal with pop artist Katy Perry, who was featured at this year's Super Bowl. The launch is set for late fall.
The investment will be made up of two tranches, the first of which would require Tencent to purchase 12.5 million shares. The purchase of the remaining 8.5 million shares will be completed once the waiting period has ended as guided by the Hart-Scott-Rodino Antitrust Improvements Act. Immediately after the deal's completion, Glu Mobile will earn a pro-forma cash balance of around $190 million, which is based on the company's recorded cash balance as of March 31, 2015.
"We look forward to collaborating with Tencent to bring more high quality and enjoyable gaming experience to our users," said Niccolo de Masi, Chairman and CEO of Glu.
