Saudi Arabia’s PIF acquires 5% stake in Nintendo

Saudi Arabia’s sovereign wealth fund has acquired a 5 per cent stake worth $2.98bn in games maker Nintendo, its latest investment in a Japanese gaming company as the sector rapidly consolidates.

According to a filing with Japan’s Ministry of Finance on Wednesday, the Public Investment Fund has bought 6.5mn shares in the Kyoto-based creator of Mario and Donkey Kong.

The acquisition marked the latest purchase by the $500bn fund in the video games and e-sports sectors, where the Saudis have been expanding in the past two years.

The move comes amid speculation about further consolidation in the gaming industry and the role Japanese companies could play in it after Microsoft’s blockbuster $69bn purchase of Activision Blizzard in January. In February, Sony said it would buy game developer Bungie for $3.6bn.

In February, the PIF disclosed stakes of more than 5 per cent in two other Japanese gaming companies, online games provider Nexon and Capcom — the maker of the Street Fighter franchise.

Japanese equities have become cheaper in dollar terms because the Bank of Japan’s ultra-easy monetary policy, which stands in sharp contrast to the US Federal Reserve’s interest rate rises to tackle inflation, has pushed the yen to multiyear lows.

Last week Nintendo projected a 29 per cent year-on-year decline in net profits for the current financial year as its president Shuntaro Furukawa warned that global chip shortages would continue to weigh on the production of its popular Switch gaming console.

Nintendo said it expected to sell 21mn Switch consoles for the financial year ending next March, compared with the 23mn units sold in the previous year. Nintendo forecasts revenue to fall 6 per cent to ¥1.6tn.

Offsetting the lacklustre results, the company also announced a 10-for-one stock split to address longtime investor calls to improve corporate governance.

Nintendo declined to comment on the PIF’s investment. PIF could not immediately be reached for comment.

PIF’s purchase of shares in Nintendo, one of Japan’s largest intellectual property holders, “may be the start for Japanese gaming companies to be integrated into a global industry reshuffle,” said Satoshi Kurihara, a gaming analyst at Tokai Tokyo Research Institute.

US and Chinese tech giants have been cautious about buying Japanese gaming companies mainly because of the difference in consumer preferences, Kurihara said. He noted that the Japanese audience preferred role-playing games with rich storylines such as Final Fantasy, as opposed to shooting games popular elsewhere.

He said, however, that this might now be changing and that PIF’s interest in the Japanese content industry showed that “institutional investors are silently eyeing the world’s third-largest content market [after North America and China].”

Source: Financial Times