Tencent's $143 Million Strategy to Join Westhills to Strengthen Game Business Cooperation

Today, Kingsoft (HK:03888) announced that Tencent has spent 143 million US dollars in strategic stake in Xishan Ju. After the transaction is completed, Tencent will hold a total of 90,896,795 Xishan Ju shares, accounting for 9.9% of the total number of shares issued by Xishan Ju.

In the future, both Xishanju and Tencent will upgrade the level of game business cooperation. Xishanju can make full use of Tencent's resources and continue to expand its core users and increase market share. At the same time, Tencent has improved its market competitiveness through Xishanju's high quality self-developed products.

According to the announcement of Kingsoft, Xishanju and Tencent intend to enter into a cooperation agreement on or before the date of completion of the transaction, which is also a prerequisite for the Tencent share purchase agreement. According to the Business Cooperation Agreement, if Xishan Ju decides not to launch and operate its own new games, Tencent has the exclusive preferential right to cooperate in the distribution and operation of the Simplified Chinese version of its own new games in mainland China; To sell certain intellectual property rights related to its own games to any external third party, Tencent has the right of first refusal under the same conditions.

According to Jinshan Software CEO and Xishan Ju CEO Zou Tao, “For Kingsoft, Tencent has played an irreplaceable role as a shareholder in the previous cyber security business. This Tencent strategy shares stake in Xishanju is the cooperation between Kingsoft and Tencent. In terms of Xishanju, this is a strategic upgrade that has come to fruition, after which we established a good relationship of trust and cooperation with each other through the cooperation of products such as “Jian Xia Love Hand Tours”, and we believe that through this cooperation, we can Multiple users provide a better entertainment experience."

Xishanju Game

Previously, Tencent and Xishanju had already cooperated in the game business. In the beginning of 2016, Tencent Mutual Entertainment and Xishanju reached an agent cooperation on “Jian Xia Love Hand Tour” and “Jian Wang 3: Fingertips”.

In the context of the overall downturn in the end-game market, Xishan Habitat Tour continued to grow rapidly for several consecutive years. According to the 2016 annual results of Jinshan Software, the revenue of Jian Wang 3 in 2016 reached RMB1.3928 billion, an increase of 56% year-on-year.

In terms of mobile games, Xishanju’s “Jian Xia Love” series of mobile games also consolidates Xishan’s position as the first camp echelon in the field of mobile games.

In all kinds of game rankings, the games that occupy the top ten all year round are roughly from three companies, namely Tencent, NetEase and Xishanju. Recently, Netease's continuous efforts in the game business, so that the industry agreed that NetEase has the hope to shake the status of Tencent game hegemony. Tencent’s strategic stake in Xishanju will greatly supplement the high-quality IP. Perhaps Tencent intends to block the growth of NetEase through external cooperation.

The following is the internal email of Kingsoft CEO Zou Tao:

Xishanju's brothers and sisters, everyone!

This year is the 22nd year of the establishment of Xishanju. From the original Xishanju Sanjians to more than 2,000 companies, although this road is awkward, today we can proudly speak of Xishan Habitat has been fruitful: Our tour Products have grown at a rate far exceeding industry expectations.

Last year, our transformation in the mobile business has also achieved a brilliant record. In addition to the return of the gold swordsmanship swordsman series, the second element and FPS products have attracted much attention!

Just in the first quarter of the past, R&D and distribution business went hand in hand, with good news. This is the result of the concerted efforts of every Xishan Juren.

Today, I have a major good news announcement: It is because of Xishan Habitat, my colleagues, love of games, and the spirit and determination of our products, we not only won the praise of the majority of players.

At the same time, it has gained greater recognition in the capital market. Our partner, Tencent, has valued Xishanju for US$1.5 billion and both parties have conducted more in-depth cooperation in product development, distribution, and operations.

Tencent's strong operation and distribution capabilities, a sound user analysis system, and a wealth of user resources are a powerful boost for Xishan to take a new step.

After Tencent has acquired shares in Xishan, we still maintain independent business development and decision management, and adhere to our unique R&D philosophy. The management team is confident and has the ability to integrate internal and external resources to lead everyone in a brighter future.

From end-to-end travel to hand travel, from research and development to distribution, from the inside to the outside, a strategic framework of all-around, in-depth, multi-angle has been formed. Xishanju built a complete game ecology and maintained its leading edge in the market.

Side-by-side travel to fight with both fists, R&D and publishing go hand in hand. Xishanju and Millet, Tencent reached the industrial front line alliance, even more powerful, this combination, so that we stand at a higher starting point, has a broader stage.

Thirty fame dust and soil, eight thousand miles road and moon. In the game on the road, we have been stubbornly forward, only looking at the wind and rain. We use the initial heart as a sword, our faith as a shield, and the way we do it. We have achieved achievements that make us proud and praise the industry. However, all glory of the past will eventually be sealed.

I hope that the brothers will always keep the original heart and love of playing games for the past 20 years in the future. With the spirit of unity and enterprising, the spirit of tenacious struggle, go further and fly higher. Let the world know that there is such a Chinese game company called Xishanju!

Zou Tao

April 21, 2017

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