Japanese technology giant Sony says it will buy video game developer Bungie in a deal worth $3.6bn (£2.7bn).
Sony says Bungie, best known for the Destiny and Halo games, will help it “reach billions of players”.
Halo is one of the games that contributed to the popularity of Microsoft’s Xbox.
Earlier this month, Microsoft revealed plans to buy video games giant Activision Blizzard for $68.7bn, which is the industry’s largest ever deal.
“This is an important step in our strategy to expand the reach of PlayStation to a much wider audience,” said Jim Ryan, president and chief executive of Sony Interactive Entertainment (SIE).
“We understand how vital Bungie’s community is to the studio and look forward to supporting them as they remain independent and continue to grow.”
Sony did not provide a timeline for when it expects the deal to be finalised.
In 2000, Microsoft bought Bungie and its game Halo: Combat Evolved became a launch title for the Xbox.
Halo sold millions of copies, helping to popularise the Xbox with gamers.
In 2007, Bungie split from Microsoft to become an independent business.
Under the terms of the separation Microsoft kept the intellectual property of the Halo franchise.
Bungie, which is based in Washington state, has more than 900 employees.
Under the Sony deal, Bungie will operate independently and continue to publish its own games after the takeover is completed.
Bungie is working on expanding its Destiny 2 universe, the first-person shooter video game which was released in 2017.
“Both Bungie and SIE believe that game worlds are only the beginning of what our IP [intellectual property] will become,” said Bungie’s chief executive and chairman Pete Parsons.
“Our original universes have immense potential and, with SIE’s support, we will propel Bungie into becoming a global multi-media entertainment company dedicated to delivering on our creative vision,” he said.
The Sony-Bungie deal helped make January a record month for mergers and acquisitions (M&A) in the video games industry.
There were two other major deals, with Grand Theft Auto creator Take-Two Interactive unveiling its buyout of Zynga for $12.7bn and Microsoft’s plan to purchase industry giant Activision Blizzard for $68.7bn.
“These three deals alone surpass the 2021 M&A deal value of $85bn, which had already been an annual record,” said Daniel Ahmad, a senior analyst at market intelligence company Niko Partners.
Mr Ahmad said he expects more consolidation in the gaming industry this year.
“Technology and media companies in particular are viewing the game publisher and developer companies to have valuable IP, talent and content” added Mr Ahmad, who covers the Middle East, North Africa and Asia video game industry.
“This leads us to consider not ‘Will there be another acquisition?’ but rather ‘Who is next?'”
The Activision Blizzard takeover will be the biggest acquisition in Microsoft’s history and will see it taking ownership of gaming franchises including Call of Duty, Warcraft and Overwatch. The deal is expected to be finalised in 2023.
Microsoft and Sony are in a battle for popularity among gamers.
Sony’s PlayStation 5 console is generally seen as having the lead over Microsoft’s fourth generation Xbox models.
The Japanese company has strengthened its network of in-house games studios and delivered a string of exclusive hits in recent years, including in its Spider-man franchise.
It is also a pioneer in virtual reality and teased some details about its next generation headset last month.(BBC)