HONG KONG, June 7 (Reuters) - A consortium led by Chinese internet major Sina Corp is in advanced talks to acquire at least 18% of Yoozoo Games , two people with direct knowledge of the matter told Reuters.
Sina is teaming up with China's Twitter-like Weibo Corp
and one Shanghai-based state investment firm, said the people who declined to be identified due to confidential constraints.
The consortium is in final talks with Yoozoo Chairwoman Xu Fenfen to buy at least 18% of the company first, said the people. An 18% stake in Yoozoo is worth about 2.86 billion yuan ($447 million) based on the Shenzhen-listed company's market value of $2.5 billion on Friday.
Yoozoo, the developer of the popular "Game of Thrones: Winter Is Coming" game, declined to comment. Sina, which one source said would set up a special purpose vehicle for the deal, and Weibo did not immediately respond to requests for comment.
In a stock exchange filing last week, Yoozoo said Xu was mulling equity transfer-related issues and had made relatively substantial progress.
The deal talks come as Sina, which is a small player in the $44 billion Chinese gaming market, is looking to accelerate its growth in the gaming industry, which received a boost last year after the COVID-19 pandemic forced many residents to stay at home, driving up game downloads.
Reuters reported in April that Bilibili was in talks to buy a 24% stake in Yoozoo Games as part of a nearly 5 billion yuan ($765 million) deal. But the online video site dropped the deal as it was not moving as fast as Sina, said one of the sources. Bilibili declined to comment.
The deal also comes in the backdrop of growing challenges for Xu, said the sources. Xu took the helm of the Shanghai-based video game company after its founder and chairman Lin Qi died under suspicious circumstances in December.
Xu has also become the legal guardian of the inheritors of Lin, who was also Yoozoo's actual controller with a 24% stake, since his death, according to the company's filings. The consortium is also looking to buy the remainder of the 24% stake in the coming months, said the people.
The consortium is seeking to finalise the deal in the coming weeks, the sources said.
In addition to the stake purchase, the consortium has also stepped in to help solve the debt problem that Lin left, said the two people.
According to Yoozoo's filing on Friday, Xu in late April managed to repay 801.7 million yuan that Lin had taken up of the company's funds. One of the sources said Xu secured the capital mainly from Sina and its affiliates.
One main attraction for the consortium to partner with Yoozoo is content opportunities. Yoozoo has sole rights globally for film and TV adaptations of the Hugo Award-winning science-fiction novel - The Three-Body Problem.
As one of China's first tech firms to list on the Nasdaq in 2000, Sina makes most of its revenue from online advertising on its news portals and Weibo. That has worried investors as the growth rate of Chinese online advertising slows and Sina has also lost ground amid fierce competition with other tech giants like ByteDance and Tencent .
Sina announced in September that it would be taken private in a $2.6 billion deal with Chief Executive Officer Charles Chao. ($1 = 6.3945 Chinese yuan renminbi)