Japanese telco SoftBank is to sell a majority stake in Finnish games maker Supercell to China's Tencent in a deal worth $7.3 billion.
The Japanese operator is trying to reduce debts after splashing more than $20 billion in 2013 on a takeover of US telco Sprint Corp. (NYSE: S), which has continued to lose out to rivals despite management changes and investments in network improvements.
Tencent Inc. has grown into one of the largest Internet companies in the world and is looking to expand its range of online and gaming services through takeover activity.
As the maker of the popular "Clash of Clans" game, which is used by a growing global community of online gamers and generates revenues from in-app purchases, Supercell holds obvious attractions for the Chinese company.
Despite having fewer than 200 employees, Supercell was reported to have made about €880 million ($992 million) in pre-tax profits last year on sales of about €2.1 billion ($2.4 billion).
Tencent is to acquire an 84% stake in the business, including SoftBank Corp. 's 72.2% holding, in a transaction that values Supercell at about $10.2 billion. It has promised that Supercell will continue to run as an independent operation with headquarters in Finland.
SoftBank said it expects to generate a pre-tax gain of 600 billion Japanese yen ($5.74 billion) from the sale in the current fiscal year, which ends in March 2017. It reckons it will make about 2.9 times its initial investment in Supercell from the deal.
"Our decision to divest our shares is driven by our continued focus on monetization for the benefit of our shareholders and on capital structure discipline, both key pillars of our SoftBank 2.0 strategy," said Masayoshi Son, SoftBank's CEO, in a statement.
Earlier this month SoftBank said it was planning to raise about $7.9 billion from selling shares in Chinese ecommerce giant Alibaba. That particular deal is expected to lower the Japanese telco's net interest-bearing debts from about 3.8 to around 3.3 times annual EBITDA. (See SoftBank to Sell $7.9B of Alibaba Shares.)
SoftBank saw net income fall by 27% in the year ending in March 2016, to JPY$558 billion ($5.34 billion), while sales rose by 7.6%, to JPY9.15 trillion ($87.6 billion).
Shares in SoftBank rose by 1.41% in Tokyo today and closed 4.8% higher than at the end of last week.
— Iain Morris, , News Editor, Light Reading