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Tencent buys 9% of Frontier Developments

Chinese company will pay £17.7 million for newly issued shares, Frontier's market cap now above £200 million

Tencent has acquired a 9% stake in Frontier Developments, in a deal worth £17.7 million.

The Chinese company has purchased 3.37 million newly issued ordinary shares, which will be admitted for trading on the AIM Stock Exchange. Tencent's stake would have been 9.9% of the Frontier prior to the new shares being issued, but only 9% after.

Frontier said that the £17.7 million would be used to augment its existing cash reserves, which stood at £12.6 million at the end of May 2017. The Cambridge-based studio will also invest in growth, in terms of its headcount and its portfolio.

Tencent's chief strategy officer James Mitchell noted Frontier's "highly scalable game engine technology, decades of development experience, and increasingly sophisticated live operations" as reasons for the investment. He also noted an increasing level of interest within China in games involving space exploration and theme parks, which feature prominently in Frontier's catalogue of IP.

"Tencent is the market leader in the online games industry in China and operating a premium PC games distribution platform, WeGame," said Frontier CEO David Braben in a statement.

"This strategic investment will both help drive our scale up, and improve access and accelerate our growth into the key Chinese market. Tencent will be a powerful partner for Frontier, in what will soon be the world's largest market for entertainment."

As part of Tencent's investment portfolio, Frontier is certainly in good company; Riot Games, Supercell, Miniclip, Epic Games, Netmarble and Paradox Interactive have all taken significant investment from Tencent in recent years. It is also the world's biggest games publisher in terms of revenue.

Frontier floated on AIM four years ago, at which point its market cap was £39.4 million. At the time of writing, its market cap stood at £209 million.

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