ByteDance in talks to buy stake in mobile games firm CMGE

ByteDance

ByteDance is currently in talks to buy into mobile games writer CMGE Technology Group, four people with direct knowledge of this matter told journalists, as the owner of short video app TikTok moves to strengthen its next column of expansion.

A CMGE spokesman said the company isn’t in talks to sell a stake to ByteDance. A ByteDance source stated it had held talks with CMGE but was not considering buying into the business.

ByteDance intends to buy a part or all of the 27.6% CMGE stake held by Fairview Ridge Investment, commanded by CMGE chairman Xiao Jian and vice chairman Sin Hendrick, said two of the people.

The people declined to be identified because the information is not public. Journalists at our partner news agency Reuters could not reach Fairview Ridge for comment.

The talks come as the gambling industry continues to gain from COVID-19 pandemic countermeasures which have forced people to remain at home, fostering game downloads.

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ByteDance is seeking to offer HK$4 to HK$5 ($0.52 to $0.64) per share to purchase the bet, said another person. The scope represents a premium of 30% to some 62% above the stock’s Monday close of HK$3.08.

After the information, CMGE’s inventory reversed losses and climbed as much as 21% to HK$3.75 in Tuesday afternoon trade – their highest since mid-October, before shutting up 1%.

Xiao and Sin would be the biggest shareholders of Hong Kong-listed CMGE, holding 33.9% and 32.6% respectively through numerous things, regulatory filings revealed.

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

Eight-year-old ByteDance has recognized gaming as its second strategic expansion area and continues to be scouting for investment opportunities for months to develop its gaming portfolio, three of the people said.

Market leader Tencent Holdings Ltd proposed a $1.5 billion acquisition of Leyou Technologies Holdings in August. That made CMGE more of a goal for ByteDance, said two of the people.

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A successful transaction could make ByteDance CMGE’s single largest shareholder, said one of the folks.

ByteDance has been comparatively successful with casual mobile games that mostly earn money through advertisements. It plans to launch its first “hardcore” game in the April-June quarter, said two other individuals with knowledge of the issue.

Hardcore games can be a steady source of revenue as users often keep playing popular titles for years and are willing to produce in-app buy for things that enhance game play, like weapons.

CMGE boasts the second-largest intellectual property bookings among Chinese games companies after Tencent, also counts “The Legend of Sword and Fairy” and “Xuan-Yuan Sword” in its portfolio. It’s exclusive licensing arrangements with ByteDance for 2 titles -“The King of Fighters: All Stars” and “One Piece: The Voyage”.

ByteDance entered gaming in ancient 2019 with casual titles. By the end of last year, 13 of its games had became strikes on Apple Inc’s App Store at China. It has a games division with around 2,000 employees working on hardcore games.

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The team at Platform Executive hope you have enjoyed this news article. Initial reporting via our official content partners at Thomson Reuters. Reporting by Julie Zhu in Hong Kong and Yingzhi Yang in Beijing. Editing by Anshuman Daga, Christopher Cushing, Tony Munroe and Susan Fenton.

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