Tencent is seeking to buy one of Britain’s most successful video game developers in a £919m deal which will face close scrutiny from the Biden administration.
The Chinese tech behemoth has offered 513p-a-share for Sumo Group, a Sheffield-based company behind popular titles such as Hitman and Forza Horizon, in the latest swoop on the burgeoning UK games industry by a foreign investor.
Tencent has applied to the US Committee on Foreign Investment in the United States (Cfius) for approval of the deal because Sumo owns Pipeworks Studios, a game developer based in Oregon.
If Cfius raises objections, it is likely that Pipeworks will be spun off rather than the takeover being scrapped.
Tencent’s announcement sent shares in Aim-listed Sumo up by 40pc and will mean a £65m payday for three of its founders.
Cfius has thwarted multiple Chinese investments into US companies, and forced microchip maker Imagination Technologies to offload its American business when it was sold to a Chinese-backed investor in 2017.
Sumo founders Carl Cavers, Darren Mills and Paul Porter
Credit: Mark Bickerdike
Although video games are typically not considered a national security issue, the committee is believed to have held discussions with Tencent about its stakes in Epic Games and Riot Games, the US companies behind Fortnite and League of Legends, over how Americans’ data is stored.
Voluntarily referring the deal to the authority would make it harder for the US to try to scupper the takeover at some point in future. The committee can choose not to investigate the deal, or leave a final decision to President Joe Biden.
Analysts at Jefferies said the deal could lead to some regulatory scrutiny, but that it is likely to proceed.
Tencent said it plans to keep Sumo’s headquarters in Sheffield and invest in the company. It will also keep Sumo chief executive Carl Cavers in his job, as well as retaining co-founders Paul Porter and Darren Mills.
Shares in Sumo, which went public in 2017, have more than quadrupled amid a global video game boom.
It follows a deal by US company Electronic Arts to buy British developer Codemasters in February, and a takeover of fellow UK company Jagex, maker of Runescape, by private equity business Carlyle.
Tencent also owns British studio Splash Damage as well as a stake in Frontier Developments.