Kadokawa shares surge after news of Sony acquisition talks

Japanese media powerhouse Kadokawa said on Wednesday it had received a letter of intent to buy its shares, a day after a Reuters report that Sony was in talks to acquire the developer of the acclaimed “Elden Ring” fantasy game sent its stock soaring.

Shares in Kadokawa, which controls “Elden Ring” developer FromSoftware, closed up 16% in Tokyo on Wednesday, adding to a 23% jump on Tuesday after the report.

Following Wednesday’s market close, Kadokawa said in a statement it had received an initial letter of intent to acquire its shares, but added that no decision has been made on the matter.

Sony, whose stock ended up 2.8% on Wednesday, has declined to comment on any talks.

Talks between the two sides are ongoing and, if successful, a deal could be signed in the coming weeks, two sources familiar with the matter told Reuters.

The deal would bolster Sony’s entertainment portfolio, which spans games, movies, music and anime.

“Anime and manga are conquering the world and Sony knows this,” said Serkan Toto, founder of the Kantan Games consultancy.

“They need firepower if they want to be a big player in these markets so they went for Kadokawa,” he added.

Sony owns anime streaming service Crunchyroll and anime planning company Aniplex, which has built a reputation for high quality series such as “Demon Slayer”.

“Adding Kadokawa anime planning/producing capacity would enhance (Aniplex’s) offerings,” Jefferies analyst Atul Goyal said in a note.

“Furthermore, Kadokawa originates its own (intellectual property) through its publishing business, it would strengthen Aniplex by adding original IP,” Goyal added.

The anime market is expected to roughly double to $60 billion by 2030, according to data from Grand View Research that was cited in a Sony presentation.

Japanese franchises have become a popular source of content for entertainment companies in recent years.

Netflix has made a live action, English-language adaptation of the “One Piece” manga, with Amazon adapting Sega Sammy’s long-running “Yakuza” game series.

FromSoftware has a track record of well-received games including “Elden Ring”, which is widely considered one of the best games ever created, and “Sekiro: Shadows Die Twice”.

But the industry is grappling with the high cost of making new games. Sony said last month it would shut down two studios including Firework Studios, whose first-person shooter “Concord” fared poorly after its August release.

The Kadokawa deal “would mean less dependence on blockbusters for PlayStation and stabilise Sony’s entertainment business overall,” Toto of Kantan Games said. Reuters