Chinese media and Internet company Tencent (TCEHY) and co-investors have agreed to buy up to 84.3% in Supercell, making them the majority shareholder in the Finnish game maker. The transaction is expected to be valued at $8.6 billion, according to Tencent.
Shenzhen-based Tencent and a consortium of investors will buy the shares in three installments from employee shareholders and former employees of Supercell, as well as Tokyo-based SoftBank (SFBTF) , which had a 72.2% stake prior to the transaction. SoftBank will have no stake in Supercell upon completion of the deal, which is expected in the July to September quarter, according to SoftBank.
SoftBank will be selling its stake in Supercell for $7.3 billion, it said. Given the sale price and dividends received during the ownership, returns to SoftBank from the investment represent 2.9 times capital invested and 93% internal rate of return. Implied valuation for 100% of Supercell's equity is about $10.2 billion, it added.
Founded in 2010, Supercell develops games for tablets and smartphones, with titles including "Clash of Clans" and "Hay Day."
"Over the past six years, we've created four top games that are now played by over 100 million people every single day," Supercell CEO Ilkka Paananen said in a release. "This new partnership offers us exciting growth opportunities in China, where we will be able to reach hundreds of millions of new gamers via Tencent's channels."
In 2013, SoftBank, a Japanese telcom and the majority owner of Sprint (S - Get Report) , teamed up with Tokyo-based GungHo Online Entertainment to acquire a 50.5% stake in Supercell for Y151 billion ($1.4 billion) before it bought GungHo's shares the following year. In May 2015, SoftBank upped its holding to 73.3% for an undisclosed amount.
For SoftBank, the transaction follows a selling spree of assets in recent weeks aimed at reducing its $80 billion debt under its "2.0 transformation strategy." On June 2, the company said it will sell a total $8.9 billion worth of shares in Alibaba, bringing down its holding in the company to around 28%. SoftBank also announced on June 6 that it would sell a majority of its stake in game publisher GungHo Online Entertainment.
Following the announcement on Supercell, SoftBank said that its chief operating officer Nikesh Arora will step down from the role to become an adviser to the company. During his tenure, SoftBank invested in e-commerce platform Snapdeal, on-demand transportation company Ola and online aggregator of hotels Oyo, all in India.
SoftBank CEO Masayoshi Son, 58, said that he had wanted to hand over the reins to Arora on his 60th birthday.
"But I feel my work is not done," Son said in a statement. "I want to cement SoftBank 2.0, develop Sprint to its true potential and work on a few more crazy ideas. This will require me to be CEO for at least another five to 10 years."
Tencent shares closed up 1.3% at HK$172.90 ($1.65) in Hong Kong. SoftBank closed up 1.4% in Tokyo at Y5,842.