Tencent sells loss-making animation and comic business to subsidiary China Literature in latest consolidation move
- China Literature, 56 per cent owned by Tencent, said it has struck a deal to buy Tencent’s animation and comics business for 600 million yuan
- Tencent has been shedding loss-making business units and consolidating its sprawling operations after it became a target for regulatory scrutiny
Tencent Holdings, China’s largest social media and video gaming company, has offloaded its loss-making animation and comics business to a subsidiary as China’s most valuable tech giant continues to slash noncore operations.
China Literature’s Hong Kong-listed shares surged more than 10 per cent following the announcement.
It will pay cash for Tencent Animation and Comics, including the app, associated intellectual property rights, and animation, film and television series.
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According to a corporate filing by China Literature, the 600 million yuan price is a 36 per cent premium compared to the assets’ book value of 442 million yuan. Tencent Animation and Comics made a loss of 111 million yuan in 2022, narrowing from 190 million yuan in 2021.
Chinese Literature CEO Hou Xiaonan said the deal will “enrich China Literature’s reservoir of blockbuster intellectual properties” and “further expand our production capacity for animation”.
“We expect this alliance to become a key driver of China Literature’s future growth, and through robust synergies, we believe the combined entity will create more value than either party could achieve individually,” Hou said in a statement.
Tencent has been shedding loss-making business units and consolidating its sprawling operations in recent years as its extensive portfolio has become an easy target for regulatory scrutiny. In the most recent case, Tencent said it would close its seven-year-old live-streaming service Now on December 26 due to “business adjustments”.
Tencent Animation and Comics was created in 2012 when young Chinese internet users were embracing Japanese-style online comics and Chinese animation video site Bilibili was winning over a huge number of fans.
Tencent tried to get a slice of the market with its own animation and comics website ac.qq.com, and by launching 200 Japanese light novels and 500 Japanese comics in one single event in 2015. However, Beijing’s rigid control of internet content and the rise of short videos meant that novel and comics creation remained a niche market in China.
Of the top 30 bestsellers on the Tencent Animation and Comics website, about half were contributed by China Literature.
