Sony in Talks to Acquire Kadokawa

By Anirban Sen and Sam Nussey
NEW YORK/TOKYO (Reuters)
Sony is in discussions to acquire Kadokawa, the Japanese media powerhouse behind the game "Elden Ring," according to two sources familiar with the matter. This move is part of Sony's strategy to expand its entertainment portfolio.

The ongoing talks could result in a deal being signed in the upcoming weeks, the sources indicated. Following the news, Kadokawa's shares surged by 23%, reaching their daily limit, with a market capitalization of about $2.7 billion before the Reuters report.

Sony (NYSE:SONY) has declined to comment, while Kadokawa has stated that it cannot provide any comment on the discussions.

Currently, Sony holds a 2% stake in Kadokawa as well as a stake in its subsidiary FromSoftware, which is known for the hit fantasy role-playing game "Elden Ring." This critically acclaimed title was developed by veteran game director Hidetaka Miyazaki in collaboration with "Game of Thrones" author George R.R. Martin. "Elden Ring" has sold 25 million units, with its expansion "Shadow of the Erdtree" quickly moving an additional 5 million units within three days of release in June.

Starting as a publisher in 1945, Kadokawa has successfully expanded its franchises, including "Re:Zero," into games, anime, events, and merchandise. Other notable franchises include "Delicious in Dungeon," a manga series adapted into anime about adventurers exploring dungeons and eating monsters they encounter.

Sony, known for inventing the Walkman, has shifted from being just an electronics manufacturer to a multifaceted entertainment and technology company spanning movies, music, games, and semiconductors. CEO Kenichiro Yoshida emphasized the longevity of lovable characters and intellectual property (IP), stating they can thrive for decades, which justifies sustainable growth investments on Sony's part.

The company's focus includes anime, which has gained global traction through streaming services and increased awareness of Japanese culture. Furthermore, Sony has successfully adapted its own franchises into various media, notably "The Last of Us" into an HBO drama.

Sony's current market valuation stands around $114 billion. Earlier this year, the company also abandoned a $10 billion merger proposal between its Indian branch and Zee Entertainment Enterprises due to unmet conditions.

Kadokawa has faced challenges recently, including a cyberattack in June that led to data leaks affecting its business operations. Additionally, two years prior, Tsuguhiko Kadokawa, the founder's son, resigned as chairman after being indicted on bribery charges associated with the Tokyo Olympics.