Tencent pays $8.6b for Supercell

After months of rumors, China’s biggest social media and gaming company, Tencent, this afternoon confirmed it has acquired the Finland-based gaming company Supercell. The studio is best known for hugely popular mobile titles like Clash of Clans and Clash Royale.

Tencent is paying US$8.6 billion to buy an 84 percent stake in Supercell from its previous owner, Softbank. That effectively values the studio at US$10.2 billion.

SoftBank no longer owns a single desk at Supercell.

Tencent – best known for its WeChat messaging app – owns Riot Games, developer of League of Legends, and has a minority stake in Epic Games, the team behind Gears of War. It also has a stake in Activision Blizzard. But Supercell is its biggest in-game purchase to date.

Describing the deal as “the world’s worst kept secret,” Supercell founder Ilkka Paananen penned a blog post this afternoon about the startup’s “next chapter” with Tencent.

“A while back, Masa (the founder of SoftBank, and our chairman) told me that if we were able to find a new partner, he would like to sell SoftBank’s shares in Supercell to finance what he called SoftBank’s 2.0 transformation strategy,” writes Ilkka. “This meant we at Supercell needed to think hard and do some soul-searching. What is it really that we want to accomplish with Supercell? What is it that we value in a partner? It may sound funny, but when we finally got our thoughts together, the choice was actually surprisingly easy.”

“As we started to spend more time getting to know potential strategic partners, it became apparent to us that a partnership with Tencent would secure everything that has made Supercell a success, while also enabling us to take a few pretty big leaps on this journey,” he continues. He says that Tencent’s passion for gaming – Tencent president Martin Lau was crestfallen to drop out of the Clash Royale global top 100 leaderboard, he notes – and the fact Supercell can remain independent were central to the decision. Plus, it means greater access to the China market.

No IPO

The agreement will not force Supercell to IPO, Ilkka states. “That is a better match with our small size and unique culture than being a public company where our concern would be the pressure from financial markets to think short term.”

The headquarters will remain in Helsinki, while “every employee is already an equity holder in Supercell” in order to keep alive incentives, the Chinese company said today in a statement. “Every employee will take part in a new long-term incentive plan, and will be able to sell their vested shares annually to Tencent,” it added.

SoftBank no longer owns a single desk at Supercell. It first took a 51 percent stake in the Finnish firm in October 2013, paying out US$1.53 billion for the privilege. The Japanese telco titan then upped its stake to 73.2 percent mid-2015 for an undisclosed amount.

So long as it didn’t overpay last year for the additional shares, Softbank recouped a tidy profit from the six-year-old startup.