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#G5 Entertainment: More M&A – this time involving #Supercell

iphoneappsM&A action within Mobile Gaming is heating up significantly with Asian players being the driving forces. Only a few days after we could report about renewed acquisitions by Gamevil (http://nordicinvestor.net/2013/10/09/g5-entertainment-ma-action-mobile-gaming/), today a really big deal becomes public, involving one of the biggest players in the sector, Finnish Supercell.

The deal marks a remarkable and big move for Softbank into the gaming world, and a massive investment for Finnish gaming juggernaut Supercell. The company is selling a 51% stake for $1.53 billion to Japan’s SoftBank and GungHo OnLine Entertainment, a games developer. This strategic investment, which will be used to fuel Supercell’s global expansion, effectively represents a quadrupled valuation for Supercell to over $3 billion in the last seven months.

GungHo and Supercell have a pre-existing relationship announced earlier this year for in-game collaboration. Softbank, meanwhile, has been a major investor not just in mobile carrier networks, but also as an investor in services to run across those networks. Its a major player both in Japan as well as in the U.S. with Sprint and has long held big ambitions to grow its business in mobile overall. In this deal, GungHo is investing 20% of the amount, and SoftBank the remaining 31%.

The 51% stake and value of it was first reported by a reporter at WSJ before getting confirmed by Supercell.

Since opening for business in 2010 the maker of Clash of Clans has been on a growth tear. On a relatively small portfolio, essentially just Clash of Clans and Hay Day, the company has managed to hold on to the number-one games publisher position between February 2013 AND August 2013. The two games, meanwhile, have been the top grossing games respectively in some 137 and 96 Apple App Store countries. That resulted in the company raising a $130 million round at a $770 million valuation in April of this year. The company has clearly continued to grow, nearly quadrupling that valuation in the last seven months.

The investment comes at a key moment in the world of social and mobile gaming. King.com is reportedly gearing up for an IPO, and all eyes are on troubled Zynga and its upcoming quarterly earnings as an indication of whether the public markets are really the best home for fast-growing gaming companies.

In that context, Supercell so far has chosen to take a different route, backing away from turning to the public markets, with all their scrutiny, and instead giving employees and shareholders liquidity through secondary sales and going to VCs for further investments. That seems to be the motivation with taking this investment, too. Writes Ilkka Paananen, CEO of Supercell in a blog post:

This new partnership will accelerate Supercell towards our goal of being the first truly global games company, and gives us enough time to get there. Let me try to explain why.  The combination of tablets, mobile and the free-to-play business model has created a new market for games, one that will be accessible to billions of consumers, more people than ever before in the history of games. This truly is a new era of gaming and has opened up exciting opportunities for new kinds of companies. 

At Supercell, one of our greatest aspirations is to become the first truly global games company, one that has a strong foothold in both the West and the East, including Japan, Korea and China. We want to build a company that people all over the globe will look back in 30 years and talk about all the great games that we developed and the impact they had on people’s lives. The same way I personally feel about Nintendo, for example.

 This is a lofty goal and getting there takes persistence, passion, and luck – but just as importantly, it takes time, and requires a lot of patience. Even if we have had a pretty good start on our journey, it is still very early days. Creating history takes time.

This new partnership also takes our collaboration with our good friends at GungHo to the next level. We are super excited to have them participate in this investment by putting in 20% of the total amount. We’ve had a great collaboration between Puzzle & Dragons and Clash of Clans. They’re an amazing bunch of people, and they have a terrific culture. Through them we’ve come to learn that the Japanese and Finnish cultures are pretty similar on many levels. Not only when it comes to taking your shoes off before you enter someone’s home, but also and more importantly, when it comes to partying, if you know what I mean.

It may sound like a detail, but I should also mention that the company that will end up owning 51% of Supercell is incorporated in Finland. This is both exciting and important for me personally. Although our aspirations are global, our roots and future are very much in Finland. Our operations remain in Finland, our management team remains in Finland and in San Francisco, and we continue to pay taxes in Finland. I think more and more people in this country are realizing that there is life after Nokia!

Naturally, this transaction is great for us from an economic perspective. As many of you know, a big part of Supercell’s culture is the idea of “we are all in this together”. In line with this thinking, everyone at the company will participate in the upside and receive a portion of the proceeds from the investment. None of us work here just for of money, but when the company succeeds, everyone should get their fair share of it and this transaction is no exception….

…Now, let’s go make history together! Kippis! Kampai!

What a buzz around mobile gaming these days! Acquistions, IPOs and in the middle of it G5 Entertainment that will soon relist to Nasdaq OMX.

Nordic Investor

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  1. Garfield October 15, 2013 Reply

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