Take-Two moves into mobile games, buys Social Point for up to $276M

Some more consolidation is afoot in the gaming industry. Take-Two Interactive, the games maker behind big titles like Grand Theft Auto, Civilization and BioShock that once rebuffed a $2 billion acquisition offer from EA, has made a definitive move into the world of mobile gaming: it has acquired Social Point, a publisher based out of Barcelona, for $250 million with additional earn-outs of up to $25.9 million.

This is a good exit for SocialPoint, which had raised less than $45 million (investors included Highland in Europe, 83 North, Greylock and Nauta Capital) since being founded in 2008.

The deal will include a cash portion of $175 million and shares of $75 million, the companies said.

This is a big move for Take-Two, which has up to now focused more on console and PC gaming, eschewing the mobile games market. Social Point has at times been referred to as the “Zynga of Europe”, although its growth and valuation (and general fortunes) have been far more rational and steady (steadily growing upwards, that is).

This is a straight diversification play for Take-Two, and an acknowledgement (after many years of staying largely out of mobile) that there is an opportunity for it in the mobile games market, specifically in the area of free-to-play.

The rise of free-to-play mobile games has been one of the very biggest and most lucrative developments in gaming in the last several years, with companies like Supercell pulling in huge returns on the back of popular titles. For Social Point, two of its biggest hits have been Dragon City and Monster Legends, which together have had over 180 million downloads across iOS and Android. The total market size for this sector was estimated at $40 billion in 2016.

“With the acquisition of Social Point, Take-Two has further diversified its business, expanded its portfolio of owned intellectual property, and significantly enhanced its position in the fast-growing free-to-play mobile gaming space,” said Strauss Zelnick, Chairman and CEO of Take-Two in a statement. “The experienced team at Social Point shares our commitment to delighting consumers with high-quality entertainment, and we believe that Social Point’s deeply-engaging mobile offerings will be a perfect complement to our business.

“Social Point is one of the few mobile game developers that has a proven track record of growing revenues and delivering multiple hits, and we expect this growth to continue given the company’s exciting development pipeline.” The company has a global audience, with half of its sales in the U.S. but it has yet to launch a single title in Asia, and so there is a clear opportunity there, too.

For Social Point, there will be an obvious question about which iconic Take-Two titles may be making their way next to mobile, on top of the fact that this will help capitalize the group to bring new titles altogether to mobile.

“Take-Two is one of the interactive entertainment industry’s premier publishers, whose labels are renowned throughout the world for their ability to create some of the most successful and beloved entertainment experiences on consoles and PC,” said Martos and Bou in a joint statement. “We are thrilled to have Social Point become part of an organization that shares our commitment to quality and innovation, and we look forward to being part of Take-Two’s continued success for many years to come.”

Take-Two’s dismissal of a $2 billion offer from EA several years ago to stay independent appears to have been the right one. The company, which is traded on NASDAQ, is valued at $4.63 billion today, and the plan is to boost that more now with a stronger mobile play.

Similar to Take-Two (and Supercell and other successful mobile games companies), Social Point has been consistently profitable since 2013 and its revenues have grown 29% CAGR from 2013 through 2016. For the trailing 12-months ended December 31, 2016, Social Point generated net revenue of $90.8 million and EBITDA of $19.9 million, Take-Two said.

  • The biggest players in the gaming world continue to generate large sums of cash as the sector surges in popularity, and that continues to drive a lot of M&A and overall consolidation. Just earlier this week, Razer also made a definitive move into mobile as it picked up Nextbit, maker of the Robin phone and a cloud storage system for managing content on mobiles.
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