Tencent Holdings Limited and Sumo Group are pleased to announce that they have reached an agreement on the terms of a recommended all cash acquisition by Tencent, through its indirect wholly-owned subsidiary, Sixjoy Hong Kong Limited ("Tencent Bidco"), of the entire issued and to be issued ordinary share capital of Sumo which members of the Tencent Group do not already own.
The price of 513 pence in cash for each Sumo Share values the entire issued and to be issued share capital of Sumo at approximately £919 million on a fully diluted basis.
Sumo has the talent, creativity, and expertise to conceive, develop, and deliver Own-IP games, but the scale and pace of doing so is restricted by the significantly increased investment and risk required to develop a new game and retain ownership of the intellectual property.
Tencent acquired a strategic shareholding in Sumo in November 2019 and the two organisations have a strong cultural alignment, in addition to their complementary skills and expertise. Being part of the Wider Tencent Group would provide significant opportunities for Sumo to accelerate its Own-IP development programme, whilst maintaining the high quality and independence of its existing work-for-hire projects, for which it has a strong pipeline. Tencent's network and global publishing capabilities, operational leverage, and insight into game-as-a-service, in-game operations, and free-to-play models, may further support such opportunities.
"The Board of Sumo firmly believes the business will benefit from Tencent's broad videogaming eco-system, proven industry expertise and its strategic resources, which will help secure and further the aspirations and long-term success of Sumo. The Board of Sumo considers that the Acquisition is in the best interests of all stakeholders in the Company and intends to unanimously recommend this offer to shareholders. Tencent's offer of 513 pence per share demonstrates the tremendous achievements of the management team, both financial and operational, since Sumo joined AIM in December 2017 at 100p per share, and provides an outstanding return for shareholders." said Ian Livingstone, Non-executive Chairman of Sumo.
"In the 18 years since we founded Sumo, we have developed more great games than we could ever have imagined and enjoyed incredible trust and support from our clients, enabling us to grow into a global business, delivering consistently strong financial results. From a single studio in Sheffield, Sumo now totals 14 studios in five countries, spread across the globe, with more than 1,200 people. Sumo is and always has been a people business and great people make great games and enjoy great times. I am proud to lead such a talented and creative group of individuals. The three founders of Sumo, who work in the business, Paul Porter, Darren Mills and I are passionate about what we do and are fully committed to continuing in our roles. The opportunity to work with Tencent is one we just couldn't miss. It would bring another dimension to Sumo, presenting opportunities for us to truly stamp our mark on this amazing industry, in ways which have previously been out-of-reach. Tencent has a strong track record for backing management teams and their existing strategies. Alongside the acceleration of Own-IP work, Tencent has demonstrated its commitment to backing our client work and has stated its intention to ensure that we have the necessary investment to continue focusing on work with our key strategic partners on turn-key and co-development projects. We love what we do and have some amazing relationships with the world's best videogames publishers. Sumo will continue to work with these clients to break new ground and create even more fantastic games. We look forward to strengthening our growth prospects through the application of Tencent's strategic resources to our Own-IP, turn-key development work ambitions, and possible acquisition opportunities. We believe that the Acquisition is in the best interests of everyone connected to the business - our shareholders, our people, and our clients - and thank all our stakeholders, past and present, for the resounding support they have given us over the years. The future for Sumo is more exciting than ever," comented Carl Cavers, Chief Executive Officer of Sumo.
"Tencent is pleased to have been an investor in Sumo since 2019, and we view the proposed combination as an evolution of our partnership. Tencent is a committed investor in the game industry, with a track record of supporting the growth of game studios around the world. We hold Sumo's team and the games they produce in high regard, and its strategy and spirit of innovation have underpinned the success of the business over many years. Tencent intends to bring its expertise and resources to accelerate the growth of Sumo both in the UK and abroad, supporting Sumo in the market for top-tier creative talent, and the UK as a hub for game innovation. We believe the proposed transaction benefits all stakeholders, and delivers compelling value for Sumo shareholders, while enhancing Sumo's capabilities for the future," stated James Mitchell, Chief Strategy Officer and Senior Executive Vice President of Tencent.
Tencent has been a supportive shareholder of Sumo since November 2019 and holds the company and its management team in high regard. Tencent believes a combination with Sumo can drive Sumo's growth and fulfil its longer-term visions with support from Tencent's strategic resources. Tencent believes that the Acquisition represents an attractive opportunity for Sumo's shareholders, board, management team and employees.
In recent years Sumo has been exploring its Own-IP, which offers enhanced margins and returns in the long term, but comes at the cost of increased investment and risk in the short term.
Tencent would seek to accelerate this business transformation by providing the necessary financial and operational resources to bolster Sumo's Own-IP development and distribution. As part of the Tencent ecosystem, Sumo can benefit from Tencent's expertise and knowledge around game development and game operations, such as know-how in game-as-a-service and in-game operations, and from Tencent's publishing expertise and coverage.
Sumo has continuously delivered well-received game releases for global top publishers and accrued expertise across multiple genres. Tencent believes that Sumo would benefit from further investment to drive longer-term growth, and that it would be a supportive partner to fuel such growth through accelerating existing investment plans and studio growth initiatives. Post the Acquisition, Sumo will continue to focus on key strategic partnerships on turn-key and co-development engagements that require strong creative inputs.
Sumo would maintain the independence of its high quality existing turn-key, co-development and work-for-hire projects given its strong pipeline and high visibility of revenue streams in the sector.
Tencent's experience investing in Western game companies such as Riot, Epic, Miniclip, Ubisoft, Funcom, Fatshark and Sharkmob, evidences its ability to successfully develop partnerships that maximise mutual value and benefits. Similar to the existing strategic alliances that Tencent has with other Western game developers, a strategic partnership between Sumo and Tencent will allow Sumo to strengthen the overall Tencent ecosystem for its games business.
Sumo Group's businesses provide acclaimed development, design and publishing services to the video games and entertainment industries from studios in the UK and abroad. The Sumo Group's principal trading subsidiaries are:
- Sumo Digital, the Sumo Group's primary business, which is one of the UK's largest independent developers of AAA-rated video games. The business has acquired four studios since its initial public offering which operate under their own names, BAFTA award-winning The Chinese Room, Red Kite Games, Lab42 and PixelAnt Games. Sumo Digital provides turn-key and co-development solutions to a global blue-chip client base;
- Pipeworks, an innovative and respected video games developer, which was acquired by Sumo in October 2020;
- Atomhawk, a multi-award-winning visual design company, servicing the games, film, and visual effects industries; and
- Secret Mode, a video games publisher focused on delivering fresh and new gaming experiences to players and building expansive and fulfilling communities around those games. It will publish titles developed within Sumo Group and independent developers.