Shares of Kadokawa soared on Tuesday, closing up 23% at the daily limit, on reports that Sony is interested in acquiring the company known for launching the hit game ‘Elden Ring.’ Sony’s shares also rose, albeit modestly by 0.6%.

Sources have disclosed to Reuters that Sony is in negotiations to incorporate Kadokawa into its vast entertainment division. A deal could be formalized in the forthcoming weeks, according to insiders. Before these reports emerged, Kadokawa was valued at approximately $2.7 billion.

Both Sony and Kadokawa have opted not to comment on the ongoing discussions. Sony currently holds a 2% stake in Kadokawa and is an investor in FromSoftware, a Kadokawa subsidiary that developed ‘Elden Ring.’

The game, a result of a collaboration between renowned game director Hidetaka Miyazaki and ‘Game of Thrones’ author George R.R. Martin, has sold 25 million units and received extensive acclaim. It features a richly atmospheric world where players battle monsters and undertake quests to repair the Elden Ring. Following its success, its expansion, “Shadow of the Erdtree,” quickly sold 5 million units in just three days following its release.

Originally founded in 1945 as a publisher, Kadokawa has diversified into gaming, anime, and other entertainment avenues, creating popular franchises such as “Re:Zero” and “Delicious in Dungeon.”

Sony, known as the inventor of the Walkman, has evolved into an entertainment and technology conglomerate with interests in movies, music, games, and electronics. Last year, Sony CEO Kenichiro Yoshida emphasized the importance of investing in enduring intellectual properties, with a particular focus on anime, which has gained global traction through streaming services and increased familiarity with Japanese culture.

Sony has also been successful in leveraging its own franchises, notably with the adaptation of the “The Last of Us” game series into a popular HBO series.

This potential deal is particularly significant for Sony as it follows the recent cancellation of a planned $10 billion merger of its Indian arm with Zee Entertainment Enterprises due to unmet conditions.

Kadokawa has faced challenges lately, including a cyberattack that led to a data leak and disrupted business activities. Additionally, Tsuguhiko Kadokawa, the founder’s son, resigned from his role as chairman following an indictment on bribery charges related to the Tokyo Olympics.

Acquiring Kadokawa would not only boost Sony’s gaming portfolio but also enhance its standing as a multimedia entertainment leader by integrating Kadokawa’s diverse content offerings.