A few years ago, gamers had a good laugh when they learned that a Chinese chicken meat company bought Digital Extremes, the maker of Triple-A games such as The Darkness 2 and Warframe. Then the company bought Splash Damage in 2016, people did a double take again.

Alex Xu, the CEO of Leyou, was the guy behind that. He was the chief business officer at Perfect World, a Chinese role-playing game maker that acquired Cryptic Studios and publishes titles such as Neverwinter. To do more deals, he left Perfect World and acquired control of a shell company in Hong Kong. It so happened the shell company was a chicken meat supplier, and Xu planned to use it as way to buy more companies. He exited the chicken business, and he is fully focused on publishing Triple-A games. Xu will be a speaker at our upcoming GamesBeat 2017 event in San Francisco on October 5 and 6.

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GamesBeat: Tell us how you got started.

Alex Xu: Once upon a time it was big news when a Hong Kong chicken meat processor acquired a triple-A game studio like Splash Damage. A lot of people were asking questions about that, why a chicken company was buying game studios. That was my start. I didn’t have any chance to explain that.

Back in 2013, when I was at Perfect World as chief business officer, we were trying to do cross-partnership deals. Perfect World was one of the early Chinese game companies that tried to do some western operations, in the U.S. We acquired Cryptic Studios, the makers of Star Trek Online and Neverwinter, and Runic Games, the maker of the Torchlight series. We did a lot of those deals. We had experience in working with western studios. Perfect World was trying to talk with any western studio doing online games, multiplayer games, trying to get them join Perfect World’s platform and bring in more online game players.

We found Digital Extremes, which was doing a free-to-play game that had just launched on Steam, Warframe. Warframe had a lot of potential, so we talked to them about doing something together. We thought we could link up Chinese experience in developing and operating online multiplayer games, especially free-to-play games. We had that experience from working with Cryptic, how to make a free-to-play game run in the right way in the western world. We had a lot of synergy there.

Then we come to the point where we were talking about merging together with Digital Extremes.

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GamesBeat: But it wasn’t easy to do?

Xu: But in early 2014, Perfect World already had some plans to go private off the Nasdaq. We were trying to find another way, instead of using internal funding, to do the acquisition. I was forced to find some other ways to do the acquisition and still keep the possibility of Perfect World doing a buyback in the future. That wasn’t easy. Whenever a studio gets sold to someone else, in most cases it’s hard to buy that back. You have to pay multiple times the valuation in the future.

A Hong Kong-listed company could serve that purpose. If you don’t do any promotion in the market and attract eyeballs from investors, you can make it very quiet. I was able to find a shell company. Previously they were in the chicken industry, supporting KFC or something, but they were almost out of business. They were still listed, but that was all. We leveraged that company to acquire Digital Extremes step by step, by issuing bonds or new shares, whatever. It’s very complicated. That took almost a year. We signed the deal in 2014 and partially finished it by 2015. It was 100 percent finished in 2016.

During those two years Perfect World was doing the privatization and relisting A shares on the Chinese domestic financial market. We were also talking to Splash Damage. We kept finding more good targets to acquire, but still by using the Hong Kong-listed company. Back then the company had a different name, but after the acquisition of Digital Extremes we changed the name to Leyou. It’s an independent Hong Kong-listed company. We’ve been able to get rid of everything related to chicken. It’s just a game company now, holding Digital Extremes and Splash Damage.

Last year, when Perfect World was trying to acquire the whole listed company back, there were some difficulties. It didn’t happen. Now there’s a new owner of the Leyou group. They did a general offer to take over the whole shell company from the previous shell owner. It’s now owned as an independent company, and they hired me as a CEO, because I’m the guy who made the deals happen. I’d already left Perfect World to work for Qihoo 360. They hired me away from Qihoo 360 to join Leyou as CEO.

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We’ve had successful experiences in designing a game for free-to-play in the west, and then seamlessly going to Korea, going to China, going worldwide. Even on console. Warframe is the top-grossing free-to-play game on PS4 and Xbox One.

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ScaryShark said:

I have a pretty large friends list and I see people constantly playing this and who have played it for years so I'm not that surprised.

I wonder what their closest competition is? World of Tanks? Smite? Paladins?

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