SEOUL, KOREA - Tencent Holdings Ltd., the Chinese investment holding company whose subsidiaries include entertainment, e-commerce, and online games, will take an equity stake worth US$500 million in CJ Games, a game development subsidiary of CJ E&M. In response, CJ E&M will spin off its game division Netmarble which will in turn merge with CJ Games to create a new entity "CJ Netmarble."

 

CJ E&M, Korea's No. 1 company in mobile games, held an interim board of directors meeting on March 26 and decided to sell a 28-percent stake in its game subsidiary at $500 million to Tencent. Once the transaction goes through as planned, Tencent will become the third-largest shareholder of CJ Games after Bang Jun-hyuk (35.88%), the Netmarble founder, and CJ E&M (35.86%).

 

Kwon Young-shik, president of CJ Games, said, "With the investment by Tencent, we will be able to take advantage of its huge platform used by hundreds of millions Chinese gamers." CJ Games will use the proceeds in acquiring game developers with promising game titles.

 

With the latest deal, the newly created company CJ Netmarble will strengthen its competitiveness in the game business while resolving the regulatory issue that kept it from owning 100-percent stakes in game development firms. Up until now, CJ Games was not supposed to take a 100-percent stake in developers as it was a subsidiary of CJ E&M which is again a subsidiary of CJ Corp.

 

A CJ E&M official said, "The game unit within CJ E&M that has been tied with others such as TV, movie, and music divisions will be separated and merged with CJ Games. That will certainly expedite decision making."