Tencent Holdings Ltd is close to closing a deal to acquire Chinese game console maker Black Shark, a move that could help the tech giant advance its metaverse ambitions, people familiar with the matter said.

Tencent has started talks to buy Black Shark, a company that specializes in gaming phones and accessories, according to the people, who asked not to be identified because the information has not been made public. One person said that the smaller company, whose investors include Xiaomi Corp, will work on making virtual reality headsets for its new mum after the deal.

Representatives for Tencent, Black Shark and Xiaomi did not immediately respond to requests for comment. The potential acquisition was previously reported by local trade publication 36Kr.

Along with global giants like Facebook owner Meta Platforms Inc, China’s biggest tech company is a contender in the race to develop the metaverse, which is seen as a virtual environment where people can interact with the internet and more. In a recent earnings call, Martin Lau, president of Tencent, described the metaverse as a “real opportunity” although he cautioned that the concept could take longer than expected to materialize.

One of the cornerstones of realizing the metaverse is the development of specialized devices. Meta was one of the early movers, buying VR headset maker Oculus in 2014, while China’s top competitor ByteDance Ltd last year bought Pico, a local VR headset maker.

Black Shark, a little-known startup that calls its users “Rebellion” members, sells its stylish phones as well as a slew of accessories like consoles in China, Europe and India. Last year, Tencent teamed up with Black Shark on a gaming phone that would improve the effects of the previous major title elite peacekeepers. – Bloomberg