10 billion yuan, Alibaba's cash cow has been sold

As learned from PE Daily - M&A Frontline, Zhou Bingshu, CEO of Lingxi Games, has issued an internal letter to all employees, formally confirming that Alibaba Group has reached an equity transfer agreement with Trustar Capital — Alibaba will sell all its shares held in Lingxi Games, and Trustar Capital will become the new controlling shareholder of the company.

According to previous reports from Bloomberg, the transaction price is expected to exceed 1.5 billion US dollars (approximately 10.1 billion RMB). No specific transaction consideration was disclosed in the internal letter.

Nine years ago, Alibaba acquired Jianyue Technology, the predecessor entity of Lingxi Games, for about 1 billion RMB. The subsequent hit game *Three Kingdoms: Tactics* immediately became the cash cow of Alibaba Games. Now, Alibaba officially divests this asset, which is taken over by a PE institution.

Once Planned for IPO, Alibaba's Hit Game Asset Changes Hands

The story dates back to a group of veteran employees from NetEase Games.

In 2011, Zhan Zhonghui (Dingdang), former COO of NetEase, left the company to start a business with his former subordinates including Chen Weian and Wu Yunyang, and founded Jianyue Technology. This group of practitioners had deeply participated in the R&D and operation of NetEase's flagship products such as *Westward Journey 2* and *Fantasy Westward Journey*. At the early stage of entrepreneurship, they adhered to the route of high-quality self-developed products and rejected short-term copycat products.

In 2014, *Momo Conquest*, the first mobile game of Jianyue, was launched, which became the representative work in the entrepreneurial stage and helped the team gain a firm foothold in the mobile game industry. After that, the team continued to polish multiple product lines of MMO and SLG. Zhou Bingshu also joined at this stage and deeply participated in the R&D of SLG projects.

At that time, Alibaba, which lacked self-development capabilities, wanted to break through the game market beyond Tencent and NetEase, and Jianyue thus came into Alibaba's sight. In September 2017, Alibaba fully acquired Jianyue Technology for about 1 billion RMB, completing the full game business chain covering self-development, distribution, distribution channels and game trading.

After being incorporated into Alibaba's Big Entertainment business group, the Jianyue team never created a phenomenal hit product. Until September 2019, *Three Kingdoms: Tactics* was officially launched, which has long stayed at the top of the iOS bestseller list and became the first super cash cow product in the history of Alibaba Games.

With the soaring popularity of the product, the "Lingxi Games" brand began to be used externally, and was officially upgraded to an independent business group in September 2020, with an organizational status parallel to Alibaba's Big Entertainment. After that, Lingxi Games formed five self-developed studios and a distribution team, coupled with two platforms, 9Game and Jiaoyimao, with the number of employees expanding to about 1,200. There was once market rumor that Lingxi Games was seeking an independent IPO, which was its peak moment within the Alibaba system.

After the highlight moment, challenges came one after another. Lingxi Games has never launched a second hit product of the same scale. At the same time, the team from external acquisition has natural frictions with the assessment and strategic system of Alibaba Group. The reporting line has been adjusted back and forth for many times, sometimes independent, and sometimes under the jurisdiction of the Big Entertainment business group.

In March 2024, Zhan Zhonghui stepped down, many founding veterans of Jianyue left, Zhou Bingshu, the producer of *Three Kingdoms: Tactics*, took over as CEO. After that, the reporting line of Lingxi Games was adjusted to Xu Hong, CFO of the group. This change was regarded by the industry as a signal of asset sorting and evaluation, and rumors of sale have been circulating ever since.

Until today, Zhou Bingshu officially announced the news in the internal letter, mentioning: "The whole transaction was successfully completed in a friendly, stable and win-win atmosphere. Both the original shareholder Alibaba Group that we have accompanied for many years, and the new shareholder Trustar Capital that just joined, fully affirm the value of Lingxi and the efforts of the team, and have high expectations for the future development of the company." It is reported that the management team will remain stable.

According to the transaction price of 1.5 billion US dollars reported by Bloomberg, Alibaba obtained a 10-fold return after holding the asset for 9 years. At the same time, this tens of billions of asset transaction is another step for the group to shrink non-core businesses. There is no doubt that the returned funds will continue to be tilted to core tracks such as cloud computing, AI and e-commerce.

The Era of M&A Bottom Fishing

Lingxi Games once triggered a bidding war.

Since Alibaba officially launched the tender for the sale of Lingxi Games assets in June 2026, many A-share listed companies and PE institutions have competed for the deal, such as 37 Interactive Entertainment, China Ruyi, Century Huatong, Giant Network, Trustar Capital, and a consortium composed of two anonymous PE institutions, which is known as one of the most fierce battles in the game industry of the year.

Even at the beginning of August, there were rumors that Giant Network and Trustar Capital both entered the final round, and the two sides might form an "industry + PE" consortium acquisition plan. It is reported that the deal failed to land due to differences in quotation, transaction structure and future control rights, and Giant Network lost the competition regretfully.

Until today, the deal finally goes to Trustar Capital.

This is another landmark case in China's game industry of "large factory incubation, PE taking over, and management staying in position". Previously, ByteDance sold 100% equity of Moonton Technology to Saudi sovereign game fund Savvy Games Group, with a transaction consideration of more than 6 billion US dollars.

Speaking of Trustar Capital, it has been very active in making investments recently.

Last month, the main entity under Trustar Capital just announced an equity transfer agreement with Jianye Properties. After the transaction is completed, it will hold 100% equity of two cultural tourism projects, *Only Henan · Drama Fantasy City* and *Zhengzhou Movie Town*, with a total transaction consideration of 3 billion RMB.

Trustar Capital said that this investment and acquisition is a strategic layout for Henan's cultural tourism industry based on its optimism about the economic and cultural value of the two cultural tourism projects. After the delivery is completed, Trustar Capital will fully empower the operation team, cooperate closely with director Wang Chaoge's team to ensure the stable quality of daily operation, and accelerate the upgrading of product content at the same time.

Previously, Trustar Capital acquired Longgu Pharmaceutical (Manyan Shuning), the leading domestic OTC brand for throat health, from Reckitt Benckiser. The multinational group divested its China business, and Trustar Capital took over the complete brand and team to lay out in the health consumption sector, while the original management team maintained the operation. Going further, the classic benchmark case created by Trustar Capital is undoubtedly McDonald's China (Golden Arches China).

Although the investment enthusiasm for cultural and entertainment consumption has faded at present, heavyweight transactions led by PE institutions are quietly emerging in these seemingly neglected tracks.

As Xin Yuesheng, Partner of Trustar Capital, once told us: "Since 2022, the market has undergone in-depth adjustments, many high-quality enterprises have experienced significant discounts, and we are now in a historic value depression. This means that the asset prices in the current M&A market are highly attractive."

Wu Keken, Partner of PAG, also said frankly at the Zero2IPO Annual Meeting: "It is the right time to do M&A in China now. The Chinese economy has achieved a considerable volume, which means a large number of M&A opportunities are emerging."

When the sellers sell high-quality assets, the buyers usher in the opportunity to buy at the bottom.

This article is from the WeChat official account "M&A Frontline", author: Yang Jiyun, published with authorization from 36Kr.