Sea, the gaming-to-ecommerce company backed by Tencent Holdings, has acquired Canadian video game developer Phoenix Labs through its digital entertainment arm Garena, accelerating the Singapore-based firm’s international expansion plans.

The teams at Garena and Phoenix Labs, the Vancouver studio behind popular cross-platform action role-playing game Dauntless, will work together to pursue mobile gaming initiatives and explore new growth opportunities in markets across Asia and South America, according to a statement from Sea on Tuesday. Financial terms were not disclosed.

“Our skills sets are highly complementary,” Sea co-founder and group chief executive Forrest Li said in the statement.

A screenshot of popular cross-platform action role-playing game Dauntless, developed by Vancouver-based studio Phoenix Labs. (Picture: Handout)

The existing management team at Phoenix Labs, which was founded in 2014 and has more than 100 developers, will continue to run the studio, while bolstering Garena’s in-house content creation capabilities. Garena, one of the earliest investors in Phoenix Labs, will help add new features to Dauntless.

The acquisition comes after the successful release of Garena’s self-developed mobile game Free Fire. This battle royale title, in which a player eliminates all opponents until there is a last man standing, was the world’s most downloaded mobile game in 2019, according to app analytics firm App Annie.

“Dauntless on mobile could potentially be a huge hit,” said Jeff Chau, founder and chief executive of Los Angeles-based social gaming connection app operator GameGether. “Dauntless needs to optimize better, and Free Fire is one of the most optimized games that can run on both low-end and high-end phones … So lots of synergy there for both companies.”

Dauntless, in which players fight monstrous creatures known as Behemoths, has gained popularity since its release in September. It has attracted more than 20 million gamers across desktop personal computer and console platforms, according to a separate statement by Phoenix Labs on Tuesday. The game is available on Microsoft Windows, PlayStation 4, Xbox One and Nintendo Switch.

The Phoenix Labs deal is also expected to benefit Sea backer Tencent, according to Chau of GameGether. Shenzhen-based Tencent, which runs the world’s largest video games business by revenue, has stepped up its overseas expansion amid tighter regulation in its home market.

On its gaming platform, Garena also sells Tencent’s most popular titles including Arena of Valor – the international version of Honor of Kings – and League of Legends. Garena had more than 320 million active users in the third quarter of last year.

The success of Free Fire could help New York-listed Sea’s video games business reach the industry’s top tier, according to Zheng Jintiao, co-founder of media outlet Gamer Boom. “Free Fire is already the hottest mobile game in the mid-tier segment of the market, and it’s gaining momentum in North America,” Zheng said. “When Sea finally breaks into that top tier on the back of Free Fire’s popularity, it could rake in US$1 billion dollar a year in gaming revenue.”