Pokie manufacturer Aristocrat has upped its bet on the online gaming market with the $US500 million ($635 million) acquisition of Plarium, the Israeli gaming company behind Vikings: War of Clans.
Aristocrat’s shares rallied as much as 6.15 per cent before closing up 1.9 per cent at $21.19 on Thursday.
Plarium has nine key titles including Terminator, Soldiers Inc and Sparta: War of Empires, and a pipeline of future releases. Its most popular game, Vikings: War of Clans, has repeatedly ranked in the top 10 grossing strategy games since its release in August 2015. Plarium’s games are free to play, but certain features are available for players to buy.
Aristocrat, which derives the bulk of its earnings from electronic gaming equipment, hardware and systems sales, said the deal would increase the revenue contribution from its fast-growing digital business from 14 to 22 per cent on a pro forma basis.
The Plarium agreement follows the acquisition of Product Madness in 2012, which the company says is now a top-five social casino gaming publisher globally.
Plarium, headquartered in Herzliya, Israel, has more than 1200 employees across five genre-specific studios and multiple offices throughout Europe, Israel and the US.
“Plarium’s business is strongly aligned with Aristocrat’s, with similar operational approaches to game development and segment and market entry, common focus on producing the world’s best gaming content and a common aspiration to be a market leader in our key target segments,” Aristocrat chief executive Trevor Croker said.
Mr Croker took over as CEO from Jamie Odell in February.
“The transaction will not only transform the scale of our digital business today, but will also preserve Aristocrat’s options to pursue acquisitions in the future in key growth segments.”
The acquisition of Plarium allowed Aristocrat to immediately expand its addressable market from $US3.2 billion in the social casino segment, to $US25.4 billion when including the strategy, RPG [role-playing game] and casual segments, he said.
“It also provides us with a stronger platform to target the $US43.6 billion overall mobile and web games market as growth segments.”
Mr Croker told Fairfax Media social gaming was an area the company had been eyeing for some time and was a “natural progression” as part of its overall digital growth strategy.
”We’ve been monitoring this sector for some years and looked at a number of different companies,” he said.
The company had been eyeing Israeli companies “given there’s a lot of talent and innovation coming out of Israel”.
Israel is a new hotspot for start-ups and its capital, Tel Aviv, is one of Prime Minister Malcolm Turnbull’s innovation “landing pads” across the world. The launching pads are designed to allow start-ups opportunities to network and move their ideas into successful businesses.
Mr Croker said the company wanted to become more clever in reading user preferences based on data analytics.
The acquisition of Plarium would provide greater digital insights, and allow Aristocrat to offer “challenges and choices” to the consumer.
CEO and co-founder of Plarium, Avraham Shalel, said Aristocrat was “an ideal partner for us given our common aspiration to be a global leader in social gaming”.
Mr Shalel would continue to lead Plarium post acquisition. He and 12 other members of the firm’s management team would stay on and had agreed to deferred consideration arrangements with Aristocrat.
The deal is expected to be completed at the end of this calendar year. It implies a multiple of 10 times earnings before interest, tax, depreciation and amortisation at year’s end and is tipped to be earnings per share accretive in fiscal 2018.