Making some of its expansion ambitions more apparent to the Hong Kong financial community, commencing this Thursday, Tencent is issuing $600 million worth of bonds to raise money for “general corporate purposes,” stating that it will be using the funds mainly to refinance offshore loans (statement here). Some believe, however, that Tencent intends to use the funds to help its expansion abroad, where it has been steadily gaining a foothold over the past year.
As the world’s third largest Internet company behind Google and Amazon, Tencent is a force to be reckoned with in China. It is now ratcheting up support for its expansion abroad, where the Shenzhen company is becoming a global player in the games industry. After its purchase of Riot Games (creators of League of Legends) in 2011 and its recent minority stake purchase of Epic Games this June, Tencent may be looking to gain more foreign reserves from this issuance for what is part of its rumored M&A plans with Activision Blizzard. Since early July, Tencent has been given the exclusive license to operate Activision’s “Call of Duty Online” game in China, and this is just the beginning.
The bond offering, which will be limited to “professional investors” only, has been given a BBB+ rating by S&P, which is a considerably good rating, as many Chinese Internet companies are relatively new with short operating history. This should attract some considerable investor interest, and it could be a prelude to a larger move if enough interest is generated.
Tencent has at times been known to be an egregious copycat, so its ambitions may need to be accompanied by either an ambitious PR campaign or a restructuring of company culture. Issuing debt in dollars should help the company expand its operations and gain more transparency abroad.
Source: South China Morning Post