Daily Tech Snippet: Monday, May 22

• Why Did a Chinese Peroxide Company Pay $1 Billion for a Talking Cat? Even by the opaque standards of Chinese mergers and acquisitions, the deal was a head-scratcher. It’s hard to see the synergies between a maker of chemical solvents and a digital cat perched over a toilet. And curiously, the buyer, which had recently been renamed Zhejiang Jinke Entertainment Culture Co., had revenue of only $133 million in 2016, according to Bloomberg data pulled from regulatory filings, and its gross profit was $55 million. Jinke won’t say where the money to buy Outfit7 came from. Talking Tom is not alone. There’s been a recent flurry of oddball pairings between Chinese industrial interests and Western entertainment companies. A real estate magnate in Beijing bought Legendary Entertainment, the movie studio that made the Dark Knight trilogy, for $3.5 billion. A maker of construction materials bought Framestore, the company behind the special effects in the Harry Potter films. Zhejiang Dragon Pipe Manufacturing Co. acquired app developer Entertainment Game Labs. And perhaps strangest of all, Digital Extremes Ltd., which created an alien battle game, and the studio Splash Damage Ltd., which made an offshoot of the Xbox hit Gears of War, were bought by an enormous Chinese poultry processor. According to CODE Advisors LLC, an investment bank that specializes in media and technology deals, 70 percent of all acquisitions of game companies since 2015 have been by Chinese buyers. Samo, for one, isn’t stopping to ask questions. A vegan, he’s using his windfall to start a food-sustainability foundation. “It’s not easy,” he says, “to find buyers for a $1 billion company.” The deal activity can best be understood as a consequence of quirks in the Chinese stock market. In China, industrial companies trade at valuations they’d never receive elsewhere in the world. Affan Butt, an investment banker who helped facilitate the sale of Jagex, says some may trade at as much as 100 times their annual earnings—more than four times the multiple of General Electric Co. This means they can acquire companies at what is effectively a discount. A target like Jagex is worth more once it’s part of a Chinese-listed company, allowing the acquirer to pay prices that appear bafflingly high to the rest of the world. 

• ‘Thanks!’ or ‘Thanks.’? Google will tailor suggested email replies to your preferences. If you use Google's Gmail app, you may have seen something new pop up on your screen this week: suggested responses for your emails. The move illustrates one way that Google is using its increased focus on artificial intelligence and machine learning. If you're wondering why and how Google can make these suggestions, here are some answers about the feature and how it works. Google calls the feature Smart Reply, and it’s pretty much what it sounds like. Google algorithms are scanning your messages and using the information it gleans to suggest ways that you could reply to any given message. Smart Reply relies on machine learning to scan the subject line and body of an email and make suggestions based on what it sees. The company said it has built up a huge bank of anonymized customer messages and response decisions to help accomplish this. It is also designed to remember your individual preferences for things, such as punctuation. So it will be able to adjust its suggestions depending on whether you're a “Thanks!” or “Thanks.” type of person. Smart Replies won't appear on every email though, Google said. You're most likely to see response suggestions on emails that can be easily answered with a simple sentence or two.

• Softbank-Saudi tech fund becomes world's biggest with $93 billion of capital: The world's largest private equity fund, backed by Japan's Softbank Group and Saudi Arabia's main sovereign wealth fund, said on Saturday it had raised over $93 billion to invest in technology sectors such as artificial intelligence and robotics. Japanese billionaire Masayoshi Son, chairman of Softbank, a telecommunications and tech investment group, revealed plans for the fund last October and since then it has obtained commitments from some of the world's most deep-pocketed investors.  In addition to Softbank and Saudi Arabia's Public Investment Fund (PIF), the new fund's investors include Abu Dhabi's Mubadala Investment, which has committed $15 billion, Apple Inc, Qualcomm, Taiwan's Foxconn Technology and Japan's Sharp Corp. The new fund made its announcement during the visit of President Donald Trump to Riyadh and the signing of tens of billions of dollars worth of business deals between U.S. and Saudi companies. Son was also in Riyadh on Saturday. After meeting with Trump last December, Son pledged $50 billion of investment in the United States that would create 50,000 jobs, a promise Trump claimed was a direct result of his election win. The fund may also serve the interests of Saudi Arabia by helping Riyadh obtain access to foreign technology. The Saudi economy has been severely damaged by low oil prices, and policymakers are trying to diversify into new industries.