Alibaba Group is expected to receive more than $2 billion from the sale of its game development unit Lingxi Games to private equity firm Trustar Capital, as the Chinese technology giant continues to shed non-core assets and concentrate resources on artificial intelligence and cloud computing.
Alibaba and Trustar have reached a formal agreement following several rounds of negotiations, according to an internal memo sent to Lingxi employees on Monday by CEO Zhou Bingshu and reviewed by Reuters.
Under the agreement, Alibaba will transfer its entire stake in Lingxi to Trustar, the memo said. It did not disclose the transaction value or the expected closing date, and provided no details on regulatory approvals or other conditions that must be satisfied before the sale is completed.
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A person familiar with the matter told Reuters that Alibaba is expected to receive more than $2 billion from the transaction.
Bloomberg News, which first reported the internal memo, said the deal would be worth at least $1.5 billion, citing people familiar with the matter.
The transaction marks another step in Alibaba’s effort to streamline its sprawling business portfolio as the company shifts capital and management attention toward areas it considers strategically important, particularly AI and cloud computing.
Alibaba operates major e-commerce platforms, cloud infrastructure and a range of digital businesses. The company has been reviewing assets outside its core priorities as it seeks to increase investment in artificial intelligence and strengthen its cloud business.
Two sources familiar with the matter said Alibaba had been seeking a buyer for Lingxi for some time. They spoke on condition of anonymity because the discussions were confidential.
For Lingxi, the acquisition will bring a new owner while preserving continuity in its management. Zhou said he and the existing management team would continue running the company after the transaction.
Zhou described Trustar, formerly known as CITIC Capital, as an Asia-focused private equity investor with the industry resources and operational expertise needed to support Lingxi’s next stage of development.
It remains unclear whether Alibaba will maintain commercial relationships with Lingxi after completing the sale. Such arrangements could potentially involve game publishing, cloud computing, or technology services.
Lingxi, based in Guangzhou, is best known for “Three Kingdoms: Strategy Edition,” a multiplayer strategy game based on China’s historical Three Kingdoms period.
The game was developed in collaboration with Japanese entertainment company Koei Tecmo Holdings, whose franchises include “Romance of the Three Kingdoms” and “Nobunaga’s Ambition.”
The sale follows several years of change at Lingxi.
The game developer had previously explored raising outside capital, according to two sources familiar with the company. One of the sources said a fundraising process planned for late 2023 stalled after Chinese authorities proposed tighter regulations for the online gaming industry.
China’s gaming sector has faced periodic regulatory intervention as authorities have sought to address concerns ranging from excessive gaming among young people to the industry’s broader social and economic impact.
Lingxi also underwent a management restructuring in 2024. Zhou, who had led the team behind “Three Kingdoms: Strategy Edition,” became chief executive after founder Zhan Zhonghui left the company, according to Chinese corporate records.
The sale therefore represents a further transition for a business that has spent several years adapting to changes in management, regulation and ownership strategy.
The transaction provides Alibaba an opportunity to unlock capital from a gaming business as the company prioritizes its technology infrastructure and AI ambitions. The proceeds could strengthen its ability to fund investments in computing capacity, AI models and cloud services at a time when competition in China’s technology sector is increasingly centered on artificial intelligence.
The deal also denotes a broader shift in Alibaba’s approach to its portfolio. Rather than maintaining ownership of a wide range of digital businesses, the company is increasingly assessing whether individual assets fit its longer-term strategic priorities.
Lingxi’s continued operation under Trustar ownership could allow the game studio to pursue growth with a more focused business strategy while giving Alibaba a substantial return from an asset it no longer considers central to its future.
The transaction remains subject to any applicable regulatory and closing conditions, which were not disclosed in the internal memo. But if completed, the sale would give Alibaba more than $2 billion in proceeds while transferring one of its gaming assets to a private equity investor. That is expected to further sharpen the company’s focus on the two areas it has identified as critical to its next phase of growth: artificial intelligence and cloud computing.