Niantic Labs, the creator of the popular augmented reality game “Pokemon Go,” has announced that it will sell its video-game division to Saudi Arabia-owned Scopely for $3.5 billion. This move comes as Niantic shifts its focus towards geospatial technology, following challenges in replicating the success of its 2016 hit game.

The sale, which was revealed on Wednesday, aligns with Saudi Arabia’s goal to position itself as the “ultimate global hub” for gaming. The nation’s sovereign wealth fund, through Savvy Games, had previously acquired Scopely for $4.9 billion in 2023 as part of a broader strategy to diversify its economy beyond fossil fuels.

As part of the agreement, Niantic will distribute an additional $350 million to its equity holders. Furthermore, the company plans to establish a new firm called Niantic Spatial, which will focus on geospatial AI technology. This new venture will be led by Niantic founder and CEO John Hanke and will be capitalized with $250 million—$200 million coming from Niantic’s balance sheet and $50 million from Scopely. All original investors in Niantic will continue to hold shares in Niantic Spatial.

Niantic has faced difficulties in recent years, notably laying off employees in 2022 and 2023, and discontinuing the “Harry Potter: Wizards Unite” game. Despite its initial success with “Pokemon Go,” the company struggled to maintain that momentum.

For Saudi Arabia, which is already emerging as a key player in the gaming industry and hosts the Esports World Cup, this acquisition supports a plan to invest nearly $38 billion in gaming initiatives through its Savvy Games Group. Savvy Games is also a significant investor in global gaming companies, including a 7.54% stake in Nintendo, which was slightly reduced last year.