(Bloomberg) -- Chinese social media goliath Tencent Holdings said on Friday it’d entered into an agreement to buy almost 10% of Sumo Group Plc, causing the latter’s shares to surge the most since its listing less than two years ago.
It was another sign for Sumo’s home city of Sheffield, in the north of England, that software could help replace steel. Sheffield once had the moniker Steel City when the U.K. was making nearly half of the world’s supply of the metal. But now China accounts for half, and Britain almost none.
Sumo’s current headquarters are nestled on a riverbank between a 250 year-old steel foundry, Sheffield Forgemasters, and the Meadowhall shopping mall, where locals earlier this month sheltered overnight after flooding devastated the region.
The company is not the first software or technology company to come out of the the city. PlusNet, once a popular and publicly-traded internet service provider, was founded in Sheffield and was acquired by BT Group Plc in 2007 where it still operates alongside BT brands such as EE.
Sheffield is home to AIM-listed WANdisco Plc. Originally founded in Silicon Valley in 2005, it shifted its headquarters to Sheffield in 2009. The Angel CoFund, a government-backed venture capital fund, is also based in the city.
It’s not the first time Tencent has invested in a U.K. gaming either, having taken a minority stake in Frontier Developments in 2017.
Sumo, founded in 2003, is best known for its work on games such as Microsoft Corp.’s Forza Horizon racing series, Warner Bros.’ Hitman 2, and developing LittleBigPlanet 3 for Sony Corp.’s PlayStation consoles and Sonic & All-Stars Racing Transformed. According to a statement Friday, the company has 10 studios in three countries. Its website states that it employs more than 600 people.
“What does Tencent see in Sumo? We guess good content,” said Ken Rumph, an analyst at Jefferies, in a research note. “We think Tencent is supporting the strong development talents of the studio that may be able to deliver high quality contents appealing to Western gamers.”
Sumo shares rose as much as 21% in trading in London Friday, reaching 186 pence.
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