Tencent Buys Stake in Kardashian Game Maker Glu Mobile

By George Stahl 

Chinese Internet company Tencent Holdings Ltd. agreed to buy 14.6% of Glu Mobile Inc., a maker of free-to-play games for mobile devices, for $126 million.

Tencent, which offers online games through its social-networking services in China, will pay $6 a share for 21 million Glu Mobile shares in separate deals. The per-share offer price represents an 11% premium to Glu's closing price Wednesday of $5.40.

In after-hours trading, Glu shares jumped 21% to $6.53. Separately, Glu Mobile--which makes the popular Kim Kardashian: Hollywood, among other mobile games--reported better-than-expected results for its first quarter and raised its 2015 revenue guidance.

Online games remain a key growth driver for Tencent, which owns the QQ and WeChat social networks. For Glu Mobile, the deal gives it a key ally in a fast-growing market and more cash. Following the deals, Glu will have a pro forma cash balance of about $190 million.

The transaction will be completed in two tranches. Tencent is purchasing 12.5 million shares on Wednesday and committing to buy the remaining 8.5 million shares after getting antitrust approval. The companies expect the second part to be completed by July.

In addition to the Tencent news, Glu also announced a partnership with Britney Spears for up to eight years. The company said its Britney game will launch in the first half of 2016.

For the first quarter, Glu Mobile's earnings rose to $1.1 million from $133,000. On a per-share basis, earnings were a penny a share in the latest quarter.

Total revenue increased 56% to $69.5 million. Excluding deferred revenue, the company's top line increased 33% to $62.4 million.

Analysts, on average, were expecting a per-share loss of a penny a share on revenue of $52 million.

Glu Mobile raised its 2015 forecast for revenue, excluding deferred revenue. The company on Wednesday said the range is now between $262 million and $287 million, up from its February estimate of $245 million to $275 million.

Analysts' average forecast was for 2015 revenue of $266 million, Thomson Reuters said.

For the second quarter, Glu projected revenue excluding deferred revenue of between $50 million and $52 million, and a per-share loss--excluding certain costs--of 3 cents to 5 cents.

Analysts, on average, were expecting a second-quarter loss of 2 cents on revenue of $51 million, according to Thomson Reuters.

Write to George Stahl at [e-mail]

Access Investor Kit for Tencent Holdings Ltd.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=KYG875721634

Access Investor Kit for Glu Mobile, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US3798901068

Access Investor Kit for Tencent Holdings Ltd.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US88032Q1094

Subscribe to WSJ: http://online.wsj.com?mod=djnwires