Tencent has bought Riot Games for about $400 million

Tencent, the giant Chinese Web holding company, has bought Los Angeles-based Riot Games for about $400 million.

It’s yet another big-dollar buyout for the game industry, which has been in an M&A frenzy for about a year, and one of the biggest investments by a Chinese company in an American digital property.

The transaction was first reported by Bloomberg, and Riot confirmed the deal to VentureBeat, though neither outlet has the financial details. Here’s how they break down, according to people familiar with the transaction:

Tencent, which had already invested in the game-maker, will pay “just south” of $400 million to buy out other investors, primarily Benchmark Capital and FirstMark Capital, who along with angels had put approximately $18 million into the company.

The company’s management team will receive some portion of that buyout themselves, but will also retain an equity stake; some will receive “stay packages.”

The total investment values the company at $472 million.

The chief appeal for Tencent is Riot’s League of Legends game, which is free to play initially, but which encourages players to pay up for skills, equipment, etc, via micro-transactions.

In that sense it’s like Zynga’s Farmville and other popular social games. But it’s a much more sophisticated game with arcade-style action: Think of World of Warcraft, on steroids and amphetamines.

The deal follows a string of Web-based game deals in the last year. Among the more notable ones: Walt Disney purchased Playdom, Electronic Arts purchased Playfish and DeNA purchased Ngmoco.

More info : China Digital Times