Aristocrat Leisure, one of the world’s largest makers of slot machines, said Thursday it was buying Plarium, the Israeli maker of the hit online game Vikings: War of Clans, for $500 million as it seeks to expand to the online world.
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The deal comes after a string of big-ticket acquisitions of Israeli companies, most recently Mexichem’s $1.5 billion purchase of the drip-irrigation maker Netafim and the $1.1 billion acquisition of NeuroDerm, a developer of devices to treat diseases of the central nervous system, by Japan’s Mitsubishi Tanabe Pharma.
Buying Herzilya-based Plarium will open the market for social gaming to Aristocrat, which today derives most of its sales from electronic gaming equipment, hardware and systems sales.
Apart from Vikings, Plarium has eight key titles including Terminator, Soldiers Incorporated and Sparta: War of Empires, and a pipeline of games in the development. Vikings, its most popular game, has been among the top-10-grossing strategy games since its release two years ago.
Plarium’s games are free to play online and on mobile platforms, including over Facebook, but certain features are available for players to buy. The Plarium deal comes five years after Aristocrat bought Product Madness to make it a top-five social casino gaming publisher globally.
Aristocrat CEO Trevor Croker said the Plarium deal, which he expects to be completed by the end of the year, will expand the company’s addressable market from about $3.2 billion in the “social casino” segment to about $25.4 billion, including strategy, role playing and casual games.
“It also provides us with a stronger platform to target the approximately $43.6 billion overall mobile and web games market as growth segments,” he added.
Croker told Fairfax Media that social gaming was an area the company had been eyeing for some time, and that the company had been eyeing Israeli companies “given there’s a lot of talent and innovation coming out of Israel.”
Plarium was formed in 2009 by an unusually large number of founders that include the brothers Avraham and Gabi Shalel and Haim and Illya Turpiashvili, as well as Ivan Vorobeychyk, Michael Morgovsky and Yaron Hakimi.
The company raised its first seed capital in 2011 from Gigi Levy-Weiss, one of Israel’s leading angel investors, who has also been the company’s chairman. According to Israel Venture Capital Research, the startup had revenues of $135 million in 2015. Sources estimated that the number is now considerably more than that because revenue growth has averaged 12% annually in recent years.
Plarium employs 1,200 people in eight offices around the world, including four in Ukraine and one each in Russia and the United States. “Plarium’s success has been driven by its ability to attract top game development talent in the global technology hubs in which it operates,” Aristocrat noted.
In addition to the $500 million in cash Aristocrat is paying, Plarium shareholders will be entitled to further payouts if the company keeps its earnings before interest, tax, depreciation and amortization in 2017 and 2018 above certain levels.
Avraham Shalel, who has been Plarium’s CEO, will stay on at the company after the acquisition is completed, Aristocrat said. He and 12 other key Plarium managers have agreed to financial arrangements with Aristocrat to ensure that they remain with the company, including deferring a portion of the money due them until the end of 2020.