eResearch | Earlier this week, Redwood City-based video game developer Electronic Arts Inc. (NASDAQ: EA) announced the acquisition of mobile game developer Glu Mobile Inc. (NASDAQ: GLUU) for $2.1 billion, a 36% premium over the closing share price on February 5 of $9.19.
As part of the transaction, Glu Mobile shareholders will receive $12.50 in cash for each share they hold and values the company at $2.1 billion. After raising over $130 million last year, Glu Mobile had $364.4 million in cash with only $39.3 million in debt.
EA, known for its sports gaming franchise, including FIFA and Madden NFL, expects to expand its mobile gaming titles through the acquisition and also attract more female gamers through Glu Mobile’s portfolio, which includes celebrity-themed and board video games.
The deal creates a leading mobile gaming provider with a portfolio of more than 15 top games, over 500 million players, and a combined $1.32 billion in bookings over the past year.
Andrew Wilson, CEO of Electronic Arts said:
“Our acquisition of Glu combines amazing teams and deeply-engaging products to create a mobile games leader with proven expertise across many fast-growing genres.”
Gaming Market Booming
During the current global pandemic, the gaming market has thrived. According to a recent industry report, the worldwide gaming market is projected to grow to US$2.2 trillion this year, up almost 10% from last year.
Online gaming, one of the fastest-growing subsets of the gaming market, includes social and mobile games that are either free-to-play or pay-to-play and can encompass Massively Multiplayer Online (MMO) games, such as World of Warcraft.
After the announcement, mobile game developer Kuuhubb (TSXV: KUU | OTCPK: BCDMF) saw its stock price increase 45% on the week. Kuuhubb, based in Helsinki, focuses on digital entertainment and casual eSports mobile games, targeting the female demographic. Kuuhubb also expects some positive price momentum this year as it has two Match-3 apps with story-based formats, Tiles & Tales and Dance Talent, set for commercial launch in 2021.
Other recent deals in the gaming space include:
- Microsoft’s (NASDAQ: MSFT) $7.5 billion all-cash acquisition of ZeniMax Media
- Zynga (NASDAQ: ZNGA) acquiring Turkey’s Peak Games for $1.8 billion
- Swedish’s Embracer (OM: EMBRAC B) $2.5 billion buying spree of Aspyr Media, Easybrain, and Gearbox
- Leaf Mobile (TSX: LEAF) acquiring East Side Games for $125 million
The gaming industry has also seen a series of IPO’s in the last year, including Playtika’s $1.88 billion IPO on the NASDAQ and PopReach Corporation (TSXV: POPR | OTC: POPRF), which listed in July 2020.
PopReach, based in Toronto, with a team of 120 gaming experts, is a mobile gaming publisher focused on acquiring and optimizing existing game franchises, and recently closed a $5 million strategic investment by Alibaba Group’s (NYSE: BABA) Global Investment Arm.
Glu Mobile a Bargain for EA
Before the deal announcement, Glu Mobile was trading at only 2.4x EV/Revenue compared to EA that trades at 6.4x EV/Revenue and other large-cap competitors such as Activision Blizzard (NASDAQ: ATVI) trading at 9.2x EV/Revenue and Zynga trading at 6.0x EV/Revenue.
The EA-Glu Mobile deal is expected to close in the second quarter this year. The market reacted positively to the deal as both companies’ share prices increased after the deal was announced.
FIGURE 1: EA and Glu Mobile’s Mobile Gaming Portfolios
Other related eResearch articles:
- January 28, 2021: Video Games and Esports Update
- January 17, 2021: Fandom to Mint Non-Fungible Tokens for Esports Fan Rewards
- January 12, 2021: eSports Betting Platform LuckBox IPO’s by Merging with Elephant Hill Capital
- October 14, 2020: Video Game Acquisitions – Microsoft Buys ZeniMax Media, TGS Esports Buys Volcanic Media, and Victory Square Buys GameOn App
