In the biggest exit ever for Israeli high-tech, a Chinese consortium is buying Playtika, the Israeli-based online games unit of America’s Caesars Interactive Entertainment, for $4.4 billion in cash, the companies announced Saturday.
With games like Bingo Blitz and Slotomania in the Apple App Store, Playtika has emerged in its six years under Caesars ownership and Israeli management as a leading purveyor of online casino gaming.
Formed in 2010, Playtika was sold to Caesar’s starting in 2011 in a two-part sale that valued the company at just $160 million. It had 20 employees when the American gaming giant first bought a 51% stake, but soon grew into a business spanning 20 countries and employing 1,300 people — 300 in Israel, where its headquarters and research and development operations are located.
Playtika will remain in Herzliya, under a management team led by CEO Robertt Antokol, said the buyers, who are led by game developer Shanghai Giant Network Technology.
“Playtika’s growth has been exceptional, and highlights its outstanding team, excellent corporate culture, cutting-edge big data analytics and its unique ability to transform and grow games,” said a representative of the buyers. Partners include Alibaba founder Jack Ma’s private equity firm Yunfeng Capital, China Oceanwide, China Minsheng Trust, CDH China HF Holdings and Hony Capital Fund.
Buying Playtika is part of a bid by Chinese gaming companies to expand beyond China, the world’s largest online gaming market. In June, Tencent, China’s biggest gaming group, agreed to buy control of Clash of Clans mobile game maker Supercell from SoftBank for $8.6 billion.
Giant is one of China’s biggest gaming companies, with nearly 50 million monthly active users and several top-grossing mobile titles. By buying into Playtika, the Israeli company will gain access to the Chinese market and give Giant entry to markets outside of China.
“Both from a regulatory and cultural viewpoint, entering Asian markets is hard. Each one is different,” said Netta Gilon, Playtika’s vice president for operations. “Most of our gamers are in the United States, Canada and Australia. The new synergy will enable us to expand and make the transition to a new gaming culture.”
The sale also marks a furthering tightening of the Israel-China business relationship. Two weeks ago, China National Chemicals Corporation agreed to buy the remaining 40% of Israel’s Adama, an agrochemicals maker, for $1.4 billion.
Unlike Israeli gaming companies like 888, Playtika doesn’t engage in actual gambling, although its games mimic the casino experience. Playtika players use virtual currency that cannot be exchanged for real money, although using the “freemium” model players can spend money in the games.
For Caesars Interactive Entertainment, which is owned by Caesars Acquisition and Caesars Entertainment Corporation, the sale will mark the loss of a major growth driver for a trouble company whose share price has dropped over 70% from its 2014 peak.
In the first quarter, Caesars Interactive Entertainment, whose main business was Playtika, saw revenues climb 29% from a year ago to $227 million. Playtika counted an average of 6.7 million players for its games every day during the quarter. Its total player population was about 20 million, of whom 922,000 were paying players.
While the Playtika sale will be a loss for Caesar’s Interactive Entertainment’s business, it will provide badly needed cash to the two companies that own it — Caesars Acquisition Company and Caesars Entertainment Corporation.
Caesars Entertainment’s main operating unit, Caesars Entertainment Operating Company, is involved in an $18-billion bankruptcy and is seeking creditor approval for a restructuring plan. However, its creditors have accused the parent company of looting choice assets from its operating unit and leaving it bankrupt. Caesars has said the acquisitions were done at fair value.
The companies said the Playtika transaction remains subject to customary regulatory approvals and other closing conditions but is expected to close in the third or fourth calendar quarter of 2016 without any obstacles.
With reporting from Reuters.
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