Reuters: Sony in talks to buy media powerhouse behind 'Elden Ring', sources say

[Cool hand luke]

Part 2

He partially admits he was wrong about Kadokawa costing 12 or 15 billion dollars, but still rounds up to 5 billion dollars, which is unrealistic to a degree. It shouldn't be more than 4.5 at the most.

He gets Sony and Tencent's ownership flipped, but I'll let that pass because of medical reasons. But what I won't let pass is that he doesn't know that Japan has squeeze out mechanisms in place and that Sony will almost certainly take 100% ownership of FromSoftware.

Also, any LOI would have had language for exclusivity in negotiations. Kadokawa can't simply take an offer from Microsoft or Tencent to get into a bidding war nor can they accept any offers from any companies until the exclusivity period ends. Whatever offer Sony comes up with Kadokawa's board will almost certainly put in front of shareholders. Most of which are institutional Japanese investors who are going to want to keep management of companies Japanese, not to mention they're not going to want to hold out for a better offer that might not come or come significantly later reducing the benefit of cash today (cash today is worth more than cash tomorrow).

Great summary. Lmao at "medical reasons". Hog Slaw isn't fit to speak on law let alone practice it.

 

[Thirty7ven]

A lot of people gave him the benefit of the doubt but here he is showing his ass.

 

[lucasthebeast19]

Starfield was not a disaster, it made plenty of money and carried them in a period where they had nothing else. CoD also made money. Bethesda was an awesome buy, probably the best gaming acquisition since Sega buying Atlus. Activision was a whole lot of money and might pay itself back but will take time. The question is if you are talking about Microsoft or talking about Xbox.

Activision is Hilariously the ones keeping Microsoft afloat without both Bethesda and Activision they'll lineup would be dry

 

[Zzero]

Activision is Hilariously the ones keeping Microsoft afloat without both Bethesda and Activision they'll lineup would be dry

Activision releases, like, one game a year. Its a big one but it is one game a year, unless you are counting King as part of Activision.

 

[Landiri]

Jason Schreier (@jasonschreier.bsky.social)

Don't worry, folks — even if Sony buys Kadokawa, rest assured that future Dark Souls and Elden Ring games will still come to Xbox

bsky.app

This is their 4D Chess plan afterall!

Putting all their games on PlayStation and Switch, and then calling them an Xbox

So, my PS5 is an Xbox too, since all their games will come there!

 

[Yurinka]

Kadokawa said they received the letter of intent, not when. Maybe received it even months ago and the announcement is ready to be made on the PS anniversary day.

but still rounds up to 5 billion dollars, which is unrealistic to a degree. It shouldn't be more than 4.5 at the most.

$5B as the total acquisition cost is totally realistic considering the market cap it had last week + a premium of let's around 40% or 50% + acquisition costs (integration costs, retention bonuses, redundancies, etc).

 

[mibu no ookami]

Kadokawa said they received the letter of intent, not when. Maybe received it even months ago and the announcement is ready to be made on the PS anniversary day.

They also said no decision had been made. Nothing has been brought to shareholders to vote on, so no, you're not going to get a announcement on December 3rd, because it hasn't reached that process where you could plan around that.

$5B as the total acquisition cost is totally realistic considering the market cap it had last week + a premium of let's around 40% or 50% + acquisition costs (integration costs, retention bonuses, redundancies, etc).

Again, man, you've gotta know what you're talking about.

It's not about the market cap it had last week. Sony's letter of intent would include the price they're willing to pay for the company. They're not going to pay a bonus on top of that price based on the fact that they're buying the company. Everyone knows that's a bubble bump that goes away if the deal doesn't go through. That is the price assuming sony buys them not the price sony is buying them for. So the premium is going to be based on the pre-public acknowledgment price, which is closer to 2.7B and with even a 50 percent premium, you're at best looking at 4.05B.

Japan has an entirely different practice around retention bonuses and you're not throwing additional money around like you would for say Bungie.

Most of Kadokawa will probably operate independently. Doubt you see much integration cost or redundancies. They might fall as a subsidiary under Sony Music, with elements of the gaming studios removed or kept on a case by case basis.

 

[lucasthebeast19]

Activision releases, like, one game a year. Its a big one but it is one game a year, unless you are counting King as part of Activision.

yeah it's probably king with there mobile cash grabs and microtransactions

 

[Yurinka]

Some fun fact about the Kadokawa heads:

Kadokawa was ruled by its founder until died in 1975 being 58 years old (too young), its successor was his son who got arrested by drug trafficking in 1993, and then another son took the lead until got arrested in 2022 for bribing related to the Tokyo Olympics. Sounds like a yakuza family.

Since then the head is Takeshi Natsuno. This guy was the creator of i-mode, meaning: he was the creator of the first mobile gaming platform and mobile internet. He's external independent director in companiles like Oracle Japan, NTT or GREE, and in the past also other ones like Sega Sammy. Like the previous Kadokawa heads, he's an atendee and panelist at the World Economic Forum and he got his MBA degree in the University of Pennsylvania.

Only 20% of Kadokawa's revenue comes from outside Japan, and he wants to heavily increase that number by increasing their digital books, manga and anime sales outside Japan plus also expanding their anime production to outside Japan.

He has a very techy, west friendly profile compared to the average Japanese businessmen. I think he's a great fit for Sony and I think he'll be happy to sell to Sony to help them bring the Kadokawa stuff to the rest of the world.

They also said no decision had been made. Nothing has been brought to shareholders to vote on, so no, you're not going to get a announcement on December 3rd, because it hasn't reached that process where you could plan around that.

Yes, they said no decision was made because if not they would have confirmed the acquisition, which still isn't -at least oficially- agreed. Only the shareholders who have the right to vote will vote whatever they have to vote, if they have to vote it, when they have to vote it.

The key shareholders pretty likely already know about the acquisition talks since the moment they started or even before. Acquisition talks don't start unless there's a consensus between the key shareholders to listen a detailed offer. In fact at least in some countries it's mandatory for companies to keep them informed about the acquisition offers justifying them if that offer would be good or not for them.

Again, man, you've gotta know what you're talking about.

It's not about the market cap it had last week. Sony's letter of intent would include the price they're willing to pay for the company. They're not going to pay a bonus on top of that price based on the fact that they're buying the company. Everyone knows that's a bubble bump that goes away if the deal doesn't go through. That is the price assuming sony buys them not the price sony is buying them for. So the premium is going to be based on the pre-public acknowledgment price, which is closer to 2.7B and with even a 50 percent premium, you're at best looking at 4.05B.

Japan has an entirely different practice around retention bonuses and you're not throwing additional money around like you would for say Bungie.

Most of Kadokawa will probably operate independently. Doubt you see much integration cost or redundancies. They might fall as a subsidiary under Sony Music, with elements of the gaming studios removed or kept on a case by case basis.

I know what I'm talking about, my studio got bought twice and have many friends whose studio was bought, and a few of them twice too. Plus many got investments from top players. You are the one talking out of your ass.

As an example, today Supercell (whose bosses are my former coworkers) today announced the investment on a new studio of also former coworkers of mine (and one of their cofounders also is cofounder of my studio).

Acquisitions pricing normally is the value of the shares plus a variable premium that depends on possible aquirers wanting to bid, potential to grow, and other stuff the company may have not reflected in the shares such as debt or value of the IPs and tech owned, manpower size, potential future revenue and profit and more.

Plus on top of that there are acquisition costs like the cost company audit for the due diligence, retention bonuses, integration costs (firing redundant people, moving people to different divisions, tons of meetings to reorganize many things, trainings tor the acquired team to teach them how their acquirer works, hiring more people for them, buying them maybe a new office, etc), taxes and way more. These acquisition costs normally depend on the size and seniority of the staff (this is a very old and successful company with over 5000 workers) and complexity of the acquired company (this has many divisions/subsidiaries and sub-subsidiaries) and planned complexity of the integration (it's going to affect multiple Sony divisions and may even involve the creation of another one).

Of course they will pay a premium and they will pay a huge one. As has been the case in all the main gaming and tech acquisition in the recent several years. And as it is the case in any industry that is in a consolidation stage, with several big players wanting to acquire the best companies available, as it is the case of gaming.

You said yourself on Tuesday that it had back then a market cap 2.9 billion dollars. Add there around 50% of a premium, this is $4.35B. Adding only $650K for acquisition costs (being Kadokawa that complex will be way more) you have the $5B.

A total acquisition price of $4.5B-$5B would be a very cheap deal, it could go higher if there are other major bidders involved. Which I assume it isn't the case considering the 30 years long relationship and the collaboration deal they already had signed 3 years ago for anime and games, pretty likely Kadokawa since the start only considered Sony as acquirer and they may have considering possible acquisition and integration options since several years ago before the previous owners retired.

 

[Yurinka]

edit: accidental doble post.