Tuesday, October 15, 2013
DJ: SoftBank To Buy 51% Stake In Finnish Game Maker For $1.5bn
HELSINKI--Japanese telecommunications and investment group SoftBank Corp. (9984) will team up with the Japanese game developer GungHo Online Entertainment Inc. (3765) to buy 51% of the Finnish mobile-game developer Supercell Oy in a $1.5 billion transaction. The deal values the ultraprofitable Finnish start-up--which has only a handful of games and is only a few years old--at $3 billion.
The transaction creates a tight alliance between two leading mobile-game developers in the world with the goal of creating "a truly global games company," Ilkka Paananen, CEO and co-founder of Supercell said in an interview. He noted that Supercell--popular for its strategy game Clash of Clans and farm-simulation title Hay Day--does not only want to be a hit in North America and Europe.
SoftBank, which is the majority owner of GungHo, will establish a new company in Finland that will become Supercell's majority owner. SoftBank will own 80% and GungHo 20% of the new company. Before the transaction, Supercell is roughly 50% owned by venture-capital funds and 50% by founders and employees.
This is the second major deal by a Finnish company with a much larger global company. Last month, Nokia Corp. agreed to sell its handset business to Microsoft Corp. for more than $7 billion.
Supercell's Clash of Clans and Hay Day have regularly ranked among the top-grossing apps in Apple Inc's app store since the two games' launch in the summer of 2012, and have recently been big hits in Japan and China. GungHo owns Puzzle & Dragons, the currently dominant mobile video game in Japan.
Supercell's two games to date are free to download and play but make money by encouraging players to make in-game purchases, such as game credits that can be used to speed up progress. This business model--referred to as "freemium" in the industry--has established itself as the norm in the fast-growing market for mobile games.
Supercell has experienced phenomenal growth since the company was established by Mr. Paananen and five other veteran game developers in 2010. Mr. Paananen said the deal allows Supercell's founders to remain in control of the company's direction while better tapping into Asian consumers and potential partners.
The company's revenue in 2011 was 150,600 euros ($204,050). In 2012, after it had launched its two current hit games, it grossed EUR78.4 million and made a net profit of EUR29.9 million, according to its annual financial report filed with Finnish authorities.
Supercell declined to disclose its current financials, but in the first quarter of this year it made an operating profit of $106 million on net sales of $178 million.
SoftBank CEO Masayoshi Son, a keen investor, recently raised SoftBank's stake in GungHo to 58.5% from around a third, and has been on the prowl for content businesses that might help him differentiate his telecom services from competitors. SoftBank in July bought No.3 U.S. wireless carrier Sprint Corp.
GungHo's "Puzzle & Dragons" boasts 19 million downloads and is played by one in three smartphone users in Japan, and has catapulted the company's quarterly net profit 18-fold from a year ago to 15.9 billion yen ($161.3 million). Based in Tokyo, GungHo has a market cap of Y816.8 billion after its share price exploded, increasing in value more than 20-fold over the past year.