Here’s why Sumo Group plc stock jumped 40% on Monday

Tencent Holdings Ltd is set to penetrate further into the global video game space. The Chinese technology giant said on Monday it will buy Sumo Group plc (LON: SUMO) for $1.26 billion. Shares of the British video game holding company were up roughly 40% on Monday. 

Tencent’s offer marks a 43% premium on Sumo’s Friday stock price

As per the agreement between the two companies, Sumo stockholders will get 513 pence per share in cash that translates to a 43% premium on the price at which the stock closed the regular session on Friday.

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Tencent’s stake in the London-listed company currently stands at 8.75%. Commenting on the news on Monday, Tencent’s chief strategy officer James Mitchell said:

Tencent intends to bring its expertise and resources to accelerate the growth of Sumo both in the United Kingdom and abroad, supporting Sumo in the market for top-tier creative talent and the U.K. as a hub for game innovation. We believe the proposed transaction benefits all stakeholders and delivers compelling value for Sumo shareholders, while enhancing Sumo’s capabilities for the future.

Founded in 2003, Sumo primarily develops video games for other publishers. For instance, it’s the developer behind Sony’s Sackboy: A Big Adventure and a range of Sega’s Sonic the Hedgehog themed racing games.

Tencent is quickly growing via investments and acquisitions

Tencent has stakes in many gaming companies, from notable names like Epic Games (Fortnite developer) to smaller players like Bohemia Interactive. The Chinese giant is currently the world’s largest video game publisher. According to analyst Daniel Ahmad of Niko Partners:

Tencent has increased the pace of its investments and acquisitions over the past year, as it looks to strengthen its position and push into new growth areas for the company. Tencent is acquiring Sumo for its breadth of experience in developing and operating AAA games and live service games, the majority of which are developed for clients such as Sony, Microsoft, Sega, and others.

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