Playtika wants some M&A action – but who’s buying?

 

Best Fiends, Redecor, June’s Journey, Pirate Kings, Solitaire Grand Harvest and more could have a new home soon if Playtika successfully finds a buyer. 

As it announced last month, Playtika has appointed financial advisor The Raine Group and law firm Latham & Watkins to pursue “a full range of strategic alternatives” which could include a sale or a merger.

The move comes just over a year after Playtika went public, its shares initially trading around $30. They have been going for around $18 for the last month.

In its last set of financial results, it reported fourth-quarter net income of $102.3m, up from $76m in the year-ago period. Revenue was also up to $649m from $573.5m in the year-ago quarter. 

As of December 31, Playtika had $1.1bn in cash and cash equivalents and $1.7bn available to fund growth opportunities. A small amount of that fund will have been spent just last week on the under-the-radar acquisition of fellow Israel-based game company JustPlay.LOL, which runs battle royale game 1v1.LOL. 

Playtika’s market cap is around $7.8bn right now. For context, Take-Two is buying Zynga for $12.7bn.

Playtika is just too big for PC and console consolidators like MTG or Embracer. So let’s consider the other usual suspects in that space, EA and Ubisoft. 

EA has previous form in big mobile acquisitions, having snapped up two companies last year: Glu for $2.1bn and then Playdemic for $1.4bn. Another acquisition, one much bigger than those two combined, would be a big surprise – especially as Playtika doesn’t have any experience in sports games like Glu (baseball) and Playdemic (golf), which obviously fit into EA Sports’ mobile strategy.

A deal of almost $8bn would also be a big stretch for Ubisoft, which many see as having a blind spot in mobile, though it has had some successes. Ubisoft has already signed a deal with Tencent to make mobile editions of some of its biggest franchises, so a move for Playtika’s casual and social casino games feels like a strange fit for a company that’s best known for its core IP. (You might have said the same about Take-Two, though, before its Zynga move.)

A more realistic bet would be a merger with another big mobile player. Names thrown around by some folks in the business include Applovin and IronSource (a company also founded in Israel). A private equity deal to buy the company to take it private could happen, too.

Nearest to home, there’s Aristocrat, which has a history in social casino, like Playtika, and has a large existing footprint in Israel through subsidiaries Plarium and Product Madness. But its appetite for mobile acquisitions seems to have slowed after buying Product Madness in 2012, Plarium in 2017 and then Big Fish in 2018.

Playtika is a very healthy business in pure financial terms, and a smart operator. But it’s one that lacks a truly mainstream IP that will catch the eye of a traditional gaming colossus in the way Zynga’s FarmVille must have greased the gears for Take-Two, or King’s Candy Crush was in the mix for the Microsoft-ABK move.

In what is already a spectacular year for games industry M&A, Playtika’s sale or merger, if it goes ahead, might end up being a rather more muted affair.