Trustar Capital nears $1.5 billion deal for Alibaba's Lingxi Games

Trustar Capital is nearing a deal to acquire Alibaba's Lingxi Games, a transaction that could value the studio at more than $1.5 billion as the Chinese internet giant pivots toward artificial intelligence.

"Trustar has emerged as the likeliest buyer after outbidding other suitors including video game makers," people with knowledge of the matter said, asking not to be identified because the information is private.

A transaction may value the studio at more than $1.5 billion, the people said. Trustar outbid domestic competitors including Century Huatong, China Ruyi and 37 Interactive Entertainment. Lingxi, founded in 2018, employs about 1,200 staff across five self-developed studios and operates the Jiuyou and Jiaoyimao trading platforms. Its flagship title, Three Kingdoms: Strategy Edition, has more than 100 million registered users.

The divestiture marks Alibaba's clearest break from gaming under chief executive Eddie Wu, who has pushed the conglomerate to focus on AI and cloud computing. The company has already reclassified Lingxi into its "All Others" reporting segment, and proceeds from a sale would be redirected into large language model training and cloud infrastructure upgrades.

A $1.5 Billion Bet on Mature Gaming Cash Flows

For Trustar, the acquisition is a calculated wager on the cash-generating power of established mobile titles. Lingxi's portfolio, which also includes Three Kingdoms Fantasy Land and Ashes of the Kingdom, provides a defensive revenue stream as China's gaming market shifts from user acquisition to engagement within proven franchises. Previous reports indicated Alibaba had considered selling Lingxi for as much as 9 billion yuan, or about $1.26 billion.

The payment structure, expected closing timeline and required regulatory approvals have not yet been disclosed. Alibaba's Hong Kong-listed shares (09988.HK) fell 1.8 percent on the day the report surfaced, though the decline tracked broader tech weakness rather than the divestiture news. The studio's roughly 1,200 employees would transfer to Trustar under the deal, the people said.

The transaction also reflects a broader shift in China's gaming sector, where slowing user growth has pushed operators to extract more value from existing franchises rather than chase new players. Tencent and NetEase, the country's two largest game publishers, have both leaned into live-service titles and international expansion as domestic growth plateaus.

Alibaba's AI Pivot Reshapes Its Portfolio

The sale fits a pattern of Chinese internet giants pruning non-core assets to fund deep-tech ambitions. Alibaba has redirected billions toward its cloud division and Qwen large language models, betting that investors will reward the AI narrative over gaming revenue. The last time Alibaba made a comparable strategic retreat was its 2021 restructuring, when it spun off several units and refocused on core commerce.

For emerging markets, the deal offers a template. As Chinese tech titans exit gaming, private equity firms are consolidating digital entertainment assets, a trend that could draw foreign capital toward African studios developing localized mobile titles. Mobile gaming consumption in Kenya and Nigeria is growing at double-digit annual rates, and the Trustar playbook shows mature, cash-generating games can command billion-dollar valuations.

If the deal closes, Trustar gains a studio with more than 100 million registered users on its flagship title alone. If it stalls, Alibaba retains a profitable asset while continuing to fund its AI push from other sources. Either way, the transaction shows where the region's largest internet company is placing its bets.

This article is for informational purposes only and does not constitute investment advice.