sega acquires rovio for eur 706 million

The Sega Corporation announced today that it is acquiring Rovio Entertainment, the Finland-based company behind the popular mobile game Angry Birds, for a total of €706 million ($774 million).

The Board of Directors of Rovio has already agreed to the terms of the tender offer submitted by the Japanese videogame developer. All shareholders of Rovio have accepted to sell their 49.1% stake in the company and the two parties expect to settle the deal by the second quarter of 2024.

Why is Sega Acquiring Rovio?

The acquisition is part of Sega’s plan to invest approximately $1.9 billion by 2026 to turn its intellectual property into successful global brands via multi-platform videogame offerings.

“SEGA aims to accelerate its growth in the global gaming market and increase its corporate value by generating synergies between SEGA’s existing businesses and Rovio’s strengths, including its global IPs and live-operated mobile game development capabilities”, the official press release reads.

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The Japanese company plans to leverage Rovio’s knowledge of the mobile gaming space to propel its new and legacy titles and it appears to be planning to create content – i.e. movies, series, and YouTube videos – that focuses on creating a fanbase for its fantasy characters like Sonic The Hedgehog.

“I am confident that, through combination of both companies’ brands, characters, fanbase, as well as corporate culture and functionality, there will be significant synergies created going forward”, commented Haruki Satomi, the President and Group CEO of Sega.

Stalled Growth May Have Prompted Rovio’s Board to Say Yes to Sega’s Proposal

The latest version of the game, Angry Birds 2, was launched in December 2015 and roughly a year after the company was reportedly ousting dozens of employees as user and revenue growth was slowing down.

A year after, the company adapted the game to the big screen with the release of The Angry Birds Movie – a blockbuster that brought over $350 million in gross revenue and that was reportedly developed on a $73 million budget.

Three years after, Rovio released the sequel of the movie called “The Angry Birds Movie 2”. However, the movie failed to come even close to what its predecessor achieved in terms of attracting the public’s interest as it generated less than half its revenue.

Aside from Angry Birds, Rovio also came up with a Candy Crush competitor called Sugar Blast and a role-playing game that involves solving murder cases called Small Town Murders. None of these two titles are contributing much to the firm’s top line thus far.

According to the company’s February 2023 Investor Presentation, its games attracted 6.3 million daily active users and they had been downloaded more than 5 billion times. This ranks Rovio among the top 3 videogame publishers in terms of downloads.

In 2022, Rovio generated total revenues of €317.7 million. In terms of gross bookings, Angry Birds 2 accounted for approximately a quarter of the firm’s total followed by Angry Birds Dream Blast.

According to this recent presentation, Rovio was not exploring a merger or acquisition. However, the fact that its financial performance has been stalled for quite a few years may have motivated the Board to approve the transaction.

Rovio went public in September 2017 via an initial public offering (IPO) that valued the company at $1 billion. Its shares were listed on the Nasdaq Helsinki exchange at a price of EUR 11.50.

Today’s bid of EUR 9.25 per share from Sega is resulting is translating into a nearly 20% loss in a period of 6 years for those who bought the shares when they were listed although ROVIO shares have traded at prices below EUR 5 on various occasions.

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