HONG KONG—Chinese Internet major Tencent Holdings Ltd. is in talks with SoftBank Group Corp. to buy the Japanese telecommunications giant's majority stake in Supercell Oy, the Finland-based maker of some of the world's most popular mobile games, according to people briefed on the discussions.

Tencent's talks with SoftBank are still at an early stage, according to the people, and it isn't clear whether SoftBank is currently in talks with other parties.

SoftBank bought a 51% stake in Supercell--maker of the farm simulator game "Hay Day" and combat simulator "Clash of Clans"-- for $1.53 billion in 2013. The Japanese company last year raised its stake to 73%, but didn't disclose how much it paid. A person familiar with both transactions said the Finnish games company was valued at around $5.25 billion last year.

Last fall, Chinese online-game developer Giant Interactive Group teamed up with Alibaba Group Holding Ltd. and held talks with SoftBank and Supercell over an acquisition, people familiar with the matter said. While Alibaba and Giant are still interested, price has been a sticking point, said one person familiar with the negotiations.

One person briefed on the matter said Tencent President Martin Lau and Chief Strategy Officer James Mitchell recently flew to Helsinki to persuade Supercell's founders to support a sale. But Supercell's founders, who can veto the deal, prefer to keep the company's management under SoftBank given it gets complete autonomy, some of the people said.

Tencent, Supercell, SoftBank, Alibaba and Giant declined to comment.

SoftBank is Alibaba's largest shareholder and Alibaba's founder, Jack Ma, sits on SoftBank's board.

A potential tie-up between Tencent and Supercell would alter the industry landscape by creating a dominant global games publisher offering some of the world's highest-grossing games for both mobile phones and personal computers. This year, revenue from mobile games is expected surpass games played on PCs and consoles for the first time, according to research firm Newzoo.

Supercell was founded in 2010 by several members of the Finnish games industry and makes only four titles: "Hay Day," "Clash of Clans," "Boom Beach" and "Clash Royale." The company's mobile games are free to download, and Supercell makes money by selling virtual goods that enhance the players' game experiences.

Supercell's earnings have ballooned as its games--some of which pit cartoon depictions of knights and mustachioed barbarians against goblins and dragons--have dominated revenue and download charts. Its most recent game, "Clash Royale," released in March, became the world's top-grossing mobile game for that month, generating revenue of more than $80 million, according to Newzoo.

Tencent is already a global leader in PC games thanks to its wholly owned U.S. unit, Riot Games, maker of the popular combat game "League of Legends." But for mobile games, Tencent is still trying to beef up its overseas profile through alliances and acquisitions. Last year, it bought minority stakes in U.S. mobile-game publishers Glu Mobile Inc. and Pocket Gems Inc. Tencent has been assembling a war chest for potential acquisitions and is raising about $4 billion for a bank loan, people familiar with the matter said earlier this month.

SoftBank's portfolio of video-game companies is one area that is under scrutiny from company President Nikesh Arora, who in March was put in charge of its international investments and operations, a person familiar with the matter said. Any sale of such assets would help shore up SoftBank's balance sheet, which is saddled with more than $80 billion in net interest-bearing debt, about a third of which is tied to its struggling U.S. mobile carrier unit Sprint Corp.

--Alexander Martin in Tokyo and Matthias Verbergt in Stockholm contributed to this article.

Write to Wayne Ma at wayne.ma@wsj.com and Juro Osawa at juro.osawa@wsj.com

 

(END) Dow Jones Newswires

May 23, 2016 04:05 ET (08:05 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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