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Tencent Nears Deal to Take Gaming Firm Leyou Private

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  • SNEJF
  • 1119.HK
  • TCEHY
  • 002602.SZ
  • TCTZF
  • AMZN

(Bloomberg) -- Tencent Holdings Ltd. is close to taking Leyou Technologies Holdings Ltd. private in a deal that would value the Chinese gaming firm at about $1.3 billion, according to people familiar with the matter.

The companies are discussing an offer price range of HK$3.30 to HK$3.40 for each Leyou share, said the people, who asked not to be identified as the information is private. Leyou’s major shareholder Charles Yuk plans to sell his entire stake in the company, the people said. Yuk held about 69% of the Hong Kong-listed firm as of the end of December, its latest annual report shows.

Shares of Leyou erased earlier losses and jumped as much as 4.8% on the Bloomberg News report. The stock closed up 2.9% at HK$3.20, giving the gaming company a market value of about $1.27 billion.

Negotiations are in an advanced stage and an agreement could be announced as soon as this week, according to the people. Talks could still be delayed or fall apart and details including offer price and timeline have not been finalized, the people said. Representatives for Leyou and Tencent didn’t immediately respond to requests for comment.

A deal would mark the end of almost a yearlong process that has been in motion since at least September. Bidders included Tencent-backed iDreamSky Technology Holdings Ltd., Zhejiang Century Huatong Group Co., a Shenzhen-listed gaming firm that also counts Tencent as a shareholder, Japanese tech giant Sony Corp., as well as private equity firms.

On July 10, Tencent Mobility Ltd., a wholly-owned unit of the Chinese tech giant, entered into an exclusive agreement with Leyou for a potential privatization. The companies didn’t provide any financial details.

Leyou, which was listed in Hong Kong in 2011, makes games including free shooting games Warframe and Dirty Bomb. It’s also working with Amazon.com Inc. to co-produce a video game based on the popular fantasy series “The Lord of the Rings,” according to its website.

The company reported a $5.8 million loss in the first half of the year, compared to $9.3 million net income in the same period in 2019. Leyou attributed the loss in part to the coronavirus outbreak’s impact on the ability to develop fresh content for Warframe, even though registered users rose 15.5% in the half-year period compared to the previous year.

(Updates share price in the third paragraph and earnings in the eighth paragraph.)

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