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By Anirban Sen and Sam Nussey
NEW YORK/TOKYO (Reuters) -Sony is in talks to acquire Kadokawa, the Japanese media powerhouse behind the "Elden Ring" game, two sources familiar with the matter said, as the technology giant looks to add to its entertainment portfolio.
The talks between the two sides are ongoing and, if successful, a deal could be signed in the coming weeks, the sources said.
Kadokawa's shares closed up 23% at their daily limit. Its market capitalisation was around $2.7 billion prior to the Reuters report. Sony's shares closed up 0.6%.
Sony declined to comment. Kadokawa said it cannot comment.
Sony already has a 2% stake in Kadokawa and a stake in Kadokawa controlled FromSoftware, the developer of the hit fantasy action role-playing game.
The critically acclaimed title is a collaboration between veteran game director Hidetaka Miyazaki and "Game of Thrones" author George R.R. Martin.
The game, which depicts an atmospheric world where players battle monsters and quest to repair the Elden Ring, has sold 25 million units and been widely praised.
The title is available on platforms including Sony's PlayStation. An expansion, "Shadow of the Erdtree", sold 5 million units in the three days after its release in June.
Kadokawa began as a publisher in 1945, but has expanded into games, anime, events and figures with franchises such as "Re:Zero", in which a teenage boy is summoned to a fantasy world.
Other franchises include "Delicious in Dungeon", a manga series adapted into anime about adventurers exploring dungeons and eating monsters they encounter.
Known as the inventor of the Walkman, Sony has transformed from an electronics manufacturer into an entertainment and technology juggernaut spanning movies, music, games and chips.
"Loveable characters and intellectual property (IP) can live for 30, 50 or 100 years," Sony CEO Kenichiro Yoshida said last year.
"That's something we want to make investment in for sustainable growth," he said.
Sony's focus includes anime, whose growth worldwide has been fueled by the spread of streaming services and greater familiarity with Japanese culture.
The group has also had success in extending the reach of its own franchises, with "The Last of Us" games series adapted into a popular HBO drama.
Sony, which has a market valuation of around $114 billion, in January scrapped the $10 billion merger of its Indian arm with Zee Entertainment Enterprises saying some conditions were not met.
Kadokawa's business has been buffeted in recent years.
In June, it was hit by a cyberattack that resulted in a data leak and affected business activities.
Two years ago, Tsuguhiko Kadokawa, the son of the company's founder, resigned as chairman after he was indicted on bribery charges related to the Tokyo Olympics.
(Reporting by Anirban Sen and Sam Nussey; Editing by Chang-Ran Kim and Kim Coghill)
