Sumo Group acquires Brighton games studio The Chinese Room

Video game creative and development services provider Sumo Group has acquired The Chinese Room for a total consideration of approximately £2.2m, it announced on Tuesday, from its founders Dan Pinchbeck and Jessica Curry.

The AIM-traded company said the net consideration was approximately £0.6m, as The Chinese Room had been acquired with around £1.6m of cash on the balance sheet.

It said the acquisition would accelerate its own-IP pipeline and provide new intellectual property, creative talent and the opportunity to develop a new studio location in the south of England.

Sumo Group described The Chinese Room as an award-winning independent game development studio based in Brighton, best known for creating experimental first-person games such as ‘Dear Esther’, ‘Amnesia: A Machine for Pigs’, ‘Everybody's Gone to the Rapture’, and most recently ‘So Let Us Melt’.

The business was founded in 2010, and named after John Searle's Chinese room thought experiment.

‘Dear Esther’ received several Independent Games Festival nominations and the award for Excellence in Visual Art in 2012, and was reportedly recognised as creating a new sub-genre of gaming, the ‘Walking Simulator’.

‘Everybody's Gone to the Rapture’, which was developed by The Chinese Room and published by Sony Computer Entertainment, won three BAFTAs among many other industry awards in 2015.

Sumo said the acquisition would bring intellectual property rights over revenue-generating games ‘Dear Esther’ and ‘So Let Us Melt’, a Google Daydream-exclusive title until late September.

It would also accelerates Sumo’s own IP pipeline with the addition of two original concepts - one of which, ‘13th Interior’, was at prototype demonstration stage.

Dan Pinchbeck was joining Sumo Group as creative director of The Chinese Room, and would be issued with options over Sumo shares under its long-term incentive plan.

Jessica Curry had chosen to leave the business to continue her career as a composer.

Sumo said The Chinese Room was located in a “creative hotspot”, giving Sumo access to a sizeable new pool of UK development talent.

It said it intended to invest in the studio, saying that in the short term, The Chinese Room would draw on the capacity of Sumo Group's other studios.

The Chinese Room was expected to generate a “modest revenue” on the published games, primarily ‘Dear Esther’.

Sumo’s board said it expected that The Chinese Room and the Brighton studio would together incur a small operating loss through the remainder of 2018, as new staff were recruited, and that the business would be profitable in 2019.

The capital cost of investment in the studio was expected to be “relatively low”.

Revenues from the historical titles would be recognised through The Chinese Room, and the Brighton studio would operate under that name.

Going forward, The Chinese Room's revenues and costs would be accounted for through Sumo Digital.

The total consideration of approximately £2.2m had been satisfied through around £1.6m cash consideration paid on completion, and approximately £0.6m through the issue of 357,485 new ordinary shares in Sumo Group to the sellers on completion.

It said the consideration shares would be subject to a 12-month lock up period, during which time - subject to customary exceptions - such shares could not be disposed of without Sumo Group consent, and thereafter to orderly market provisions for a further 12 months.

“I am really pleased with the acquisition of The Chinese Room and that Dan has chosen to join Sumo Digital,” said Sumo Group chief executive officer Carl Cavers.

“We believe his renowned and proven creative abilities will add real value to the business.”

Cavers said The Chinese Room had an “outstanding reputation”, and its acquisition would “enhance and extend” Sumo Digital's capabilities as well as bringing new intellectual property and accelerating its IP pipeline.

“This acquisition follows on from our new studio in Newcastle, which we took over from CCP Games in January this year and which is now performing strongly.

“Having a studio in the south of England opens further doors for the group, and we are confident that it will create exciting opportunities.”