Alibaba Group is set to sell its gaming unit Lingxi Games to Asian private equity firm Trustar Capital for more than $2 billion, according to a person familiar with the matter. Bloomberg reported a lower floor of $1.5 billion, citing separate sources.

Alibaba (BABA) stock rose 1.92% on the news.

An internal memo sent to Lingxi staff on Monday by CEO Zhou Bingshu confirmed that a formal agreement had been reached after several rounds of talks. Zhou said he and the management team would remain in place after the ownership change.

Trustar Capital, formerly known as CITIC Capital, is an Asia-focused private equity firm. Zhou said it has the industry resources and operational expertise to support Lingxi’s next stage of growth.

The memo did not disclose the exact deal value, the expected closing date, or any regulatory conditions tied to the transaction.

Lingxi, Alibaba, and Trustar did not respond to requests for comment from Reuters.

Alibaba Sheds Non-Core Assets

The Lingxi sale fits a pattern Alibaba has followed since at least late 2024. The company sold its stakes in hypermarket operator Sun Art and department store chain Intime for a combined $2.6 billion, moves that Chairman Joe Tsai and CEO Eddie Wu described as part of a portfolio streamlining effort. Tsai and Wu have said Alibaba is concentrating resources on its core e-commerce operations and on its cloud and AI businesses.

According to two sources familiar with the matter, Alibaba had been quietly seeking a buyer for Lingxi for some time. One source said a fundraising process planned for late 2023 stalled after China proposed tighter gaming regulations. Those draft rules, issued by the National Press and Publication Administration, coincided with a sharp selloff in gaming stocks and were later withdrawn for revision.

Alibaba also went through a management reshuffle in 2024. Zhou, who led the team behind “Three Kingdoms: Strategy Edition,” was appointed CEO after founder Zhan Zhonghui departed.

It remains unclear whether Alibaba will keep any commercial ties with Lingxi after the sale, including cloud services or publishing arrangements.

Lingxi’s Background

Guangzhou-based Lingxi is best known for “Three Kingdoms: Strategy Edition,” a multiplayer mobile strategy game developed in collaboration with Japan’s Koei Tecmo, whose franchises include “Romance of the Three Kingdoms” and “Nobunaga’s Ambition.” Since launching in 2019, the title has ranked among China’s top-grossing mobile strategy games. The deal would further reduce Alibaba’s presence in a Chinese gaming market long dominated by Tencent and NetEase.

Alibaba’s move mirrors a decision made by ByteDance earlier this year, when it sold its gaming studio Moonton, the developer of “Mobile Legends: Bang Bang.” Both companies have increased investment in AI, and their ChatGPT-style services — Alibaba’s Qwen and ByteDance’s Doubao — rank among the most-used AI apps in China.

The Lingxi deal has not yet disclosed a closing timeline or details on regulatory approvals.