Reuters could not immediately ascertain the potential size of the initial public offering (IPO) and the current valuation of Selangor-based Lemon Sky, which is also known for its work on Naughty Dog's The Last of Us Part I and II as well as Capcom's "Street Fighter 6".

Australia-listed game developer iCandy Interactive bought Lemon Sky for A$44.5 million ($30 million) in 2021.

Lemon Sky and iCandy did not immediately respond to requests seeking comment.

IPO proceeds from the listing will be used to expand Lemon Sky's business further, the sources said, declining to be named as the matter is private.

Founded in 2006, Lemon Sky has grown to now employ over 500 artists and counts major global game titles such as Blizzard Entertainment's "Diablo II: Resurrected" and "Warcraft 3: Reforged" among its portfolio, according to its website.

Its clients and partners include EA Entertainment, Microsoft Studios, Disney, Nickelodeon and Bandai Namco.

($1 = 1.4963 Australian dollars)

(Reporting by Yantoultra Ngui; Editing by Devika Syamnath)

By Yantoultra Ngui