Tencent has entered exclusive talks to acquire Leyou Technologies Holdings.
The Chinese gaming giant said on Friday that it intends to privatise Leyou, which is valued at more than $1 billion.
In early July it was claimed that Sony was weighing up a bid for Hong Kong-listed Leyou, which is the owner of Warframe studio Digital Extremes and Dirty Bomb developer Splash Damage, which more recently worked on Xbox‘s Gears Tactics.
Tencent, which has already invested in more than 800 firms, is one of the biggest companies in the world by market value ($680 billion).
As well as owning League of Legends maker Riot Games, it has a 40% stake in Epic Games and holds shares in Activision Blizzard, Ubisoft, PUBG Corporation parent company Bluehole, Sumo Group, PlatinumGames, and Marvelous Inc.
Earlier this month Tencent opened a new studio in Orange County, California, called LightSpeed LA.
Sony announced on Thursday that it has acquired a $250m stake in Fortnite and Unreal Engine firm Epic Games.