Mobile gaming company Playtika (NASDAQ:PLTK) is spreading its wings beyond the gaming space in its $600 million purchase of design entertainment app purveyor Reworks.
The Israeli company said late Monday it’s acquiring Finland-based Reworks, the owner of the popular design entertainment mobile app Redecor. While an app where players decorate homes may not seem like a natural fit for the company behind Slotomania and mobile casino games, Playtika sees big potential with Redecor. That’s by way of the target’s status as the second-largest design entertainment app and its robust in-app purchase market.
In-app purchase revenue in the Design Entertainment category has grown at a 33 percent compounded annual growth rate since 2019, based on App Annie,” according to a statement issued by the companies. “Home Décor comprises 12 percent of all US e-commerce sales, is one of the most popular categories on Pinterest, and returns more than 100 million Home Décor-related Instagram posts.”
Under the terms of the agreement, Playtika is acquiring 80 percent of Reworks for $400 million in cash. The remaining 20 percent of the Finnish company can be acquired for $200 million based on the target’s 2022 earnings before interest, taxes, depreciation and amortization (EBITDA). If a certain EBITDA goal isn’t exceeded, Playtika gets the outstanding 20 percent for $1.
Interesting But Sensible Fit for Playtika
Playtika, which went public in January, is the company behind well-known mobile games such as Bingo Blitz, Caesars Slots, Slotomania, and World Series of Poker (WSOP) Social.
Its Reworks purchase is practical from the standpoint that the Finnish company’s user base shares demographic traits with Playtika’s 36 million-plus monthly users. Moreover, the deal is forecast to boost Playtika’s 2021 sales by approximately $30 million.
The purchase could also bolster the Israeli company’s already dominant perch in mobile games, as it’s the firm behind nine of the top 100 highest-grossing games in the major app stores.
Playtika has some interesting gaming industry lineage. A year after Playtika was found, it was acquired by Caesars Interactive, a unit of the famous casino operator, for $130 million. Hence the Caesars Slots offering.
When it came under financial duress and needed cash, the old version of Caesars sold Playtika to the aforementioned Chinese investors in 2016 for $4.4 billion. Today, the company has a market capitalization of $10.76 billion.
Maybe More Deals for Playtika
Founded in 2010, Playtika has an acquisitive history. The Reworks deal is the suitor’s eighth acquisition to date, and its largest.
With consolidation the topic of the moment across the gaming industry, including mobile gaming and social casinos, Playtika is leaving the door open to more deals, and it has the resources to execute on that front.
“Following this transaction, Playtika remains well-positioned to continue pursuing its M&A strategy, with approximately $1.4 billion in available liquidity for future deals,” said the company.
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