Chinese technology conglomerate Alibaba Group has finalized arrangements to transfer ownership of its gaming subsidiary Lingxi Games to Trustar Capital, an Asia-based private equity firm, in a transaction valued at more than $2 billion, according to a person with direct knowledge of the agreement. The divestiture aligns with Alibaba's broader strategic realignment of its business portfolio. Separate reporting from Bloomberg, citing different sources, placed the transaction's minimum value at $1.5 billion.

Shares of Alibaba (BABA) advanced 1.92% following the announcement.

CEO Confirms Deal in Internal Memo

In a company-wide communication distributed Monday to Lingxi employees, CEO Zhou Bingshu verified that a definitive agreement had been executed following multiple negotiation phases. Zhou indicated that both he and the current leadership structure would continue in their roles following the ownership transition.

Trustar Capital, previously operating under the name CITIC Capital, specializes in private equity investments across Asian markets. Zhou characterized the firm as possessing both the sector knowledge and the operational capabilities necessary to facilitate Lingxi's continued expansion.

The internal communication did not specify the precise transaction amount, an anticipated completion timeframe, or any regulatory prerequisites tied to the deal. Representatives from Lingxi, Alibaba, and Trustar declined to provide statements when contacted by Reuters.

Continued Portfolio Streamlining

The transaction represents a continuation of the strategic direction Alibaba has pursued since the latter part of 2024, as the company concentrates resources on artificial intelligence and cloud computing initiatives. The scale of that refocus is substantial: Alibaba has said it plans to invest at least 380 billion yuan — more than $50 billion — in cloud computing and AI infrastructure over three years, a commitment company executives described as exceeding Alibaba's combined capital spending over the previous decade. The corporation previously divested its ownership positions in the retail chains Sun Art and Intime for an aggregate $2.6 billion — disposals that Chairman Joe Tsai and CEO Eddie Wu characterized as elements of a comprehensive portfolio optimization initiative. Since the fourth quarter of 2024, Alibaba has divested more than $4.6 billion worth of non-essential business units.

According to two individuals with knowledge of the situation, Alibaba had been discreetly pursuing potential acquirers for Lingxi for an extended period. Plans to conduct a capital-raising round in late 2023 were postponed after Chinese authorities introduced proposals for stricter gaming sector regulations, one source disclosed. Those draft rules, issued by the National Press and Publication Administration, proposed caps on in-game spending and curbs on rewards for frequent play, triggering a selloff in listed gaming stocks before regulators later pulled them back.

The gaming unit underwent leadership changes during 2024. Zhou, who oversaw development of "Three Kingdoms: Strategy Edition," assumed the CEO position following the exit of founder Zhan Zhonghui.

Whether Alibaba will maintain any business relationships with Lingxi after the transaction — such as cloud infrastructure provision or distribution agreements — remains undetermined.

About Lingxi Games

Headquartered in Guangzhou, Lingxi has built its reputation primarily on "Three Kingdoms: Strategy Edition," a multiplayer mobile strategy title developed in partnership with Japanese gaming company Koei Tecmo, the creator of renowned franchises including "Romance of the Three Kingdoms" and "Nobunaga's Ambition." Launched in 2019, the title has ranked among China's highest-grossing mobile strategy games.

Alibaba's strategic shift parallels a comparable action taken by ByteDance in recent months, which divested its Moonton gaming studio, the developer of "Mobile Legends: Bang Bang." Both technology companies have significantly increased their commitments to AI development, with their respective ChatGPT-equivalent platforms achieving top usage rankings among Chinese AI applications.

No information regarding the transaction's completion schedule or regulatory approval requirements has been made public at this time.