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Midway Games (MWY) has taken another step toward bringing its outside game developers in-house, purchasing Paradox Development in an all-stock deal.

Midway issued 333,334 shares -- worth about $3.38 million at the time of the acquisition --to acquire Paradox, which is developing the upcoming

Mortal Kombat: Shaolin Monks

title for Midway. The video-game software publisher completed the purchase on Nov. 19.

Additionally, Midway divvied up another 261,906 shares -- worth about $2.66 million at the time of the acquisition -- in restricted stock to 15 Paradox employees as retention bonuses.

Paradox is the third game developer that Midway has acquired this year. In October, Midway bought Inevitable Entertainment. And in April, the company acquired Surreal Software.

The video-game sector has seen increasing consolidation in recent months as publishers gear up for the next generation of game consoles, which are expected to start showing up on store shelves late next year.

Shaolin Monks

is the first

Mortal Kombat

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title to be developed outside of Midway, according to company spokesman Reilly Brennan. While other titles in the series have been basically pure fighting games, the latest title is in the action-adventure genre, and represents an attempt by Midway to broaden the audience for

Mortal Kombat

, Brennan said.

Paradox has previously developed games for


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Electronic Arts


, but following the merger, the studio will develop solely for Midway, Brennan said.

In recent trading, Midway's stock was off 6 cents, or 0.6%, to $10.72.