Tencent buys stake in gaming firm

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Tencent REUTERS Tencent headquarters at Nanshan Hi-Tech Industrial Park in the southern Chinese city of Shenzhen.

Beijing - China's Tencent Holdings Ltd said on Wednesday it was buying a 28 percent stake in South Korean mobile gaming firm CJ Games for $500 million.

The purchase will help Tencent, China's biggest listed Internet company, expand its profitable online and mobile gaming business and grow its presence abroad.

CJ Games is an online and mobile games developer and publisher.

The investment marks the latest stage in a frenzy of deals in China's Internet sector, as Tencent, Alibaba Group Holding, the world's biggest e-commerce company, and Baidu Inc, China's biggest search engine, all race to take control of people's smartphones as mobile Internet use booms in China.

More than 500 million people, or four in every five Internet users in China, have gone online with a mobile device as of December, according to the official China Internet and Network Information Center.

“Our partnership combines CJ Games' unrivalled game development skills and mobile game line-up, together with Tencent's strong game publishing and operation capabilities in China,” said Martin Lau, Tencent's president, in a press release on Wednesday.

The deal will also establish a foothold for CJ Games in China and pave the way for Tencent and CJ Games to make a global push, the press release said.

Tencent, China's biggest listed Internet firm and a social media giant, rules China's smartphones with its WeChat app, known as Weixin in China.

In January it had 225 million active users, according to Beijing-based consultancy iResearch, covering over three-quarters of the total number of people analysed.

Now the company is trying to push WeChat overseas.

Globally the app now has 355 million monthly active users, the company said earlier this month.

Tencent will focus more of its overseas investment on WeChat in markets where it already has traction, executives said on a conference call following earnings results released this month.

Tencent spent more than 19.1 billion yuan ($3.08 billion) on investments last year, up 17.6 percent from 2012.

Alibaba, its closest competitor, has invested more than $3.5 billion since the beginning of 2013, according to Reuters calculations.

Tencent will buy a mix of existing and newly issued common stock, the company said in a statement to the Hong Kong Exchange, making it the third-largest investor in CJ Games after Bang JH and CJ E&M Corp.

CJ Games will also acquire and merge Netmarble, a game distribution division of CJ E&M, the statement said.

Tencent is more than one-third owned by South African publishers Naspers Ltd. - Reuters

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