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Negotiations To Take Up A Stake In Mobile Games Firm CMGE Being Conducted By ByteDance

Negotiations To Take Up A Stake In Mobile Games Firm CMGE Being Conducted By ByteDance
Negotiations for taking up a stake in the mobile games publisher CMGE Technology Group by China’s ByteDance is currently going on between the two companies as the Chinese firm, the owner of the short video sharing app TikTok, tries to create another source of revenue and growth for the future.
The novel coronavirus pandemic has been a boon for the global gaming industry as people, holed up in their homes as restrictive measures to prevent the spread of the pandemic, took to video and mobile games to while away time.
According to reports citing sources with knowledge of the matter, the plan of the Chinese firm is to purchase part or all of 27.6 per cent stake held in CMGE by Fairview Ridge Investment Ltd which is in turn controlled by CMGE chairman Xiao Jian and vice chairman Sin Hendrick.
According to reports, ByteDance could make an offer of between HK$4 and HK$5 ($0.52 to $0.64) per share for purchasing the stake. As the news emerged into the open, the shares of CMGE staged a comeback from losses to rise as much as 21 per cent to HK$3.75 in Tuesday afternoon trade.
With a share of 33.9 per cent and 32.6 per cent, Xiao and Sin are the biggest shareholders of Hong Kong-listed CMGE respectively, showed regulatory filings.
According to calculations based on CMGE’s market capitalisation of $997 million on Monday, the value of 27.6 per cent stake is $275 million.
Gaming has been identified as its next strategic growth area by the eight-year-old ByteDance and has been looking around for making investments for augmenting its faming portfolio, said reports quoting sources. 
In August, a $1.5 billion acquisition of Leyou Technologies Holdings Ltd was proposed by the market leader in the global gaming market Tencent Holdings Ltd. According to analysts, that enhanced the importance of CMGE as a target for ByteDance.
Sources said that if the deal goes through, ByteDance could become the single largest shareholder of CMGE. Reports however also cautioned that the deal is not finalised and could get derailed.
There were no comments on the reports available from ByteDance and CMGE.
Its venturing into the area of casual mobile games that mainly make money through advertising has already been relatively successful for ByteDance. Its first “hardcore” game is planned by the company to be released in the April-June quarter, said reports qiting sources with knowledge of the matter.
Since it has been witnessed that users tend to keep playing popular titles for years and are generally ready to shell out money for in-app purchase that enhance game play, such as weapons, therefore hardcore games can be a steady source of revenue.
After Tencent, the second largest intellectual property reserves among Chinese games firms is possessed by CMGE, and the company has games such as the “The Legend of Sword and Fairy” and “Xuan-Yuan Sword” in its portfolio. For two of its games -
The company also has exclusive licensing agreements with ByteDance“The King of Fighters: All Stars” and “One Piece: The Voyage”, the company has exclusive licensing agreements with ByteDance.

Christopher J. Mitchell

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