Shares of Glu Mobile, which developed Deer Hunter and Kim Kardashian: Hollywood games, rose about 24 percent in extended trading on Wednesday.
Tencent, known for investing in game developers through partnerships and minority stakes, owns League of Legends developer Riot Games and has a stake in Activision Blizzard Inc, the owner of the Call of Duty franchise.
Glu Mobile reported a better-than-expected profit for the eighth straight quarter on Wednesday, helped by strong demand for games such as Racing Rivals, Deer Hunter 2014 and Contract Killer: Sniper.
The company plans to launch a mobile game with pop star Britney Spears in the first half of 2016.
Tencent has been aggressively taking on Chinese giants such as Alibaba Group Holding Ltd and Xiaomi Inc in the technology industry.
Tencent launched on Tuesday an operating system for internet-connected devices such as TVs and watches that is open to all developers.
The Chinese company will pay $6 per share for its stake in Glu Mobile. The price represents a premium of about 11 percent to the stock's Wednesday close.
Tencent will buy the shares in two tranches: 12.5 million shares on Wednesday followed by a further 8.5 million some time in the second quarter.
Cowen and Co LLC provided a fairness opinion to Glu Mobile's board in connection with the deal.
Glu Mobile's shares were trading at $6.69 after the bell.
© Thomson Reuters 2015
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