China Gaming Giant Tencent Forks Over $400M For Majority Stake in Riot Games

The latest outbound Chinese deal to hit the market is Tencent's majority stake acquisition in Los Angeles-based Riot Games. The deal is estimated to be aroud $400M

The latest Chinese deal to hit the international games market is Tencent’s majority stake acquisition in Los Angeles-based Riot Games. The deal is estimated to be aroud $400M. More after the jump.

Riot Games, the developer and publisher of online action strategy game League of Legends, has apparently developed a very professional team and solid business infrastructure so much so to entice Tencent to buy out Riot Games’ earlier investors Benchmark Capital and FirstMark Capital last week. The two VC firms had invested $18M and this buy out makes Tencent the majority stake owner in the company.

“This is exciting news for ‘League of Legends’ players and the existing Riot Games team,” said Brandon Beck, CEO, Riot Games. “Tencent’s investment will provide our talented team of designers, developers and community staff with additional resources to focus on innovating around ‘League of Legends’ and launching new projects that push the boundaries in the gaming space.”

Riot Games’ League of Legends is a free to play game that makes money on selling decorative items, functional enhancements and new characters. The game won PC Gamer’s free-to-play Game of the Year award. It’s not clear what Riot Games will exactly use the money for but apparently they have expressed interest in massively acquiring employees and publishing managers in emerging markets such as Russia, Brazil, Thailand and Indonesia. In fact the company’s website currently lists 92 active job openings with 20 international opportunities.

The Chinese game market is a rising tide – increasing by 25% in the 4th quarter of last year. This move can be great for Tencent who is looking to expand in the west and already controls roughly 20% of China’s online gaming market. Riot Games will maintain its headquarters in Los Angeles and we wish them success coming up.

“Tencent is committed to delivering premium quality online games to global gamers and Riot has proven its capability in the development of its flagship title,” said David Wallerstein, Senior Executive Vice President of Tencent. “Tencent will provide the Riot team with the support and autonomy to continue to deliver high quality experiences that impress both fans and critics in the global gaming market.”

This deal rivals ngmoco’s acquisition by DeNA in magnitude which was also reported at roughyl $400M. Word on the street is that Asian companies have excess cash sitting around and although I’m not sure about China, in Japan these companies are getting heavily taxed for having extra capital and so we can expect much more M&A activity in this space to come.