Consumer electronics group Sony joined Kirkbi, the parent company of toy brand Lego, to each invest $1bn in US-headquartered video game producer Epic Games yesterday at a $31.5bn valuation.
Epic is the developer of game franchises including shoot-em-ups Gears of War, Unreal and Fortnite, the battle royale shooter which had generated in excess of $9bn in revenue in its first three years of release and which has just added Marvel characters for its latest season.
All the company’s games make use of Unreal Engine, a proprietary game engine it also licenses to other developers. The engine has been utilised in game series such as Mass Effect and Batman: Arkham Asylum, and Epic released the latest iteration for wider use last week.
Kirkbi’s investment came after Lego announced a partnership agreement with Epic last week focusing on metaverse gaming products. CEO Søren Thorup Sørensen said: “A proportion of our investments are focused on trends we believe will impact the future world that we and our children will live in.
“This investment will accelerate our engagement in the world of digital play, and we are pleased to be investing in Epic Games to support their continued growth journey, with a long-term focus toward the future metaverse.”
The deal gives Kirkbi a 3% stake in the company while Sony’s funding enabled it to grow its stake to 4.9% according to the Financial Times. It follows a $200m investment by the corporate in April 2021 as part of a $1bn round increasing Epic’s valuation 66% to $28.7bn.
Kenichiro Yoshida, Sony’s chairman, president and chief executive, said this week: “As a creative entertainment company, we are thrilled to invest in Epic to deepen our relationship in the metaverse field, a space where creators and users share their time.
“We are also confident that Epic’s expertise, including their powerful game engine, combined with Sony’s technologies, will accelerate our various efforts such as the development of new digital fan experiences in sports and our virtual production initiatives.”
Investment and financial services group Fidelity also took part in the 2021 round, as did Appaloosa, Baillie Gifford, GIC, Ontario Teachers’ Pension Plan Board, Park West, KKR, AllianceBernstein, Altimeter Capital, Franklin Templeton, Luxor Capital, funds and accounts advised by T Rowe Price and funds and accounts managed by BlackRock.
Epic had closed a $1.78bn primary and secondary round in August 2020 at a $17.3bn valuation that featured $250m from Sony and additional cash from Fidelity, Baillie Gifford, Lightspeed Venture Partners, Ontario Teachers’ Pension Plan Board, KKR, Smash Ventures, David Tepper and funds and accounts managed by both BlackRock and T Rowe Price.
The company was valued at nearly $15bn in a $1.25bn round in 2018 featuring esports team owner Axiomatic, Smash Ventures, KKR, Iconiq Capital, Vulcan Capital, Kleiner Perkins and Lightspeed Venture Partners.
Internet and gaming group Tencent had already invested $330m in Epic in 2012 in return for a 40% stake. Its earlier backers include media and entertainment group Walt Disney and talent and entertainment agency Endeavor.
Tim Sweeney, Epic’s founder and chief executive, said yesterday: “As we reimagine the future of entertainment and play we need partners who share our vision. We have found this in our partnership with Sony and Kirkbi.
“This investment will accelerate our work to build the metaverse and create spaces where players can have fun with friends, brands can build creative and immersive experiences and creators can build a community and thrive.”
