Glu Mobile Inc. (NASDAQ:GLUU) has entered into a deal with Tencent Holdings Ltd, the leading social network in China. As per the deal, Tencent will acquire 14.6% shares in of Glu Mobile for $126 million. The move is part of the company’s attempts to take on other giants like Alibaba Holdings. Tencent already has an Open Source operating system for internet connected devices.
The compensations in the deal indicate that Tencent would pay $6 per share to Glu Mobile. However, Tencent is being cautious about the transaction. The company has agreed to buy the shares in two installments. The first 12.5 million shares will be bought this week while the remainder would be bought in the next quarter. This allows the company to review Glu Mobile’s performance and see how much it would gain from the acquisition.
Glu Mobile has already reported its 1Q2015 report and it has beat analyst estimates by a margin. Unsurprisingly, the stock sky rocketed, up by almost 26% after the announcement. The 1Q2015 also showed significant progress on the part of Glu Mobile, as the company reported $62.44 million in revenues. The increase year-over-year had been 33% and $11 million more than analyst estimates.
However, there had been a few downsides in the report as well. The company lost $0.04 in Non-GAAP EPS when compared to same period in the previous year. However, there was no loss in EPS when compared to the previous quarter, with the analysts predicting a loss of 1 cent. Now the new deal with Tencent, would not only benefit the Chinese entertainment giant, but also give Glu Mobile a chance to better reach the large market. The company has recently been more focused on creating mobile games based on celebrities. With plans to continue this strategy, the company will still have a dominant market in North America.
Glu Mobile Inc. (NASDAQ:GLUU) closed at $6.90 after gaining 2.07% on May 1. The company has 107.83 million shares being traded in the market, with a 52-week range of $3.27-$7.60.