Tencent to Become Largest Shareholder in Japan’s Marvelous

(Bloomberg) -- Tencent Holdings Ltd. is buying a 20% stake in Japan’s Marvelous Inc., giving the smaller company capital to develop its game franchises and sending its shares soaring.

China’s biggest game company, through affiliate Image Frame Investment, will spend about 7 billion yen ($65 million) to buy stock in the company, the Japanese games maker said in a statement. Marvelous will sell 8.62 million new shares for 576 yen apiece, while shareholders Amuse Capital and Nakayama Hayao will sell 2.83 million and 708,600 shares respectively at the same price.

Marvelous plans to use the money to build out its existing game franchises and launch new ones over the next three years. Its current titles include Story of Seasons and Deamon X Machina. Shares popped 17%.

Tencent has been one of China’s most aggressive overseas investors, backing everything from technology startups to coffee-and-donuts chain Tim Hortons Inc. Among game developers, Tencent has taken stakes in Epic Games Inc., the North Carolina-based company behind Fortnite, and South Korean studio Bluehole, which fostered PlayerUnknown’s Battlegrounds.

“Tencent’s reason for the investment is probably to learn how to make console games from Japanese companies, one of the last frontiers for the Chinese tech company’s game business,” said Hideki Yasuda, an analyst at Ace Research Institute. “The investment will help Marvelous ride through the period of global economic uncertainty, and release more of its domestically-popular titles to the Western market.”

Tencent and Marvelous have already been working together, with the Chinese company making a game with the Story of Seasons intellectual property. Marvelous said it decided to expand the relationship so it could invest more in its games, launch new initiatives and expand globally.

Marvelous said it expects Covid-19 and fifth-generation wireless services will serve as catalysts to bring changes to the game industry. Gamers will demand more from each title, requiring companies to step up their efforts.

(Updates with shares from first paragraph)

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