Aussie games provider, Aristocrat Leisure, is making a move into the strategy gaming space after purchasing Plarium for AUD$633 million.
In a note to market on August 10, Aristocrat CEO Trevor Croker explained that the takeover of Plarium will help the company expand into new gaming markets.
Under the terms of the deal, Aristocrat will pay $633 million for the Israeli company through a combination of existing cash and an incremental seven-year loan worth $538 million.
As part of the takeover, Aristocrat will make an earn-out payment to Plarium shareholders worth 10X the company’s earnings before interest, taxation, depreciation and amortisation (EBITDA).
Additionally, Plarium co-founder and CEO Avraham Shalel will remain in place after the acquisition is complete.
Start of a New Era at Aristocrat
For Aristocrat, the deal represents an opportunity to move into a new space. At the point of its latest financial return, Aristocrat announced a year-on-year revenue increase of 22 percent for the first six months of 2017.
Thanks to total takings of $1.23 billion, fuelled largely by 57 percent growth in the US, the pokie provider’s net profit topped $250 million.
With business booming in the casino industry, Aristocrat is hoping to enjoy the same success in the strategy and social gaming markets. According to Statista, massively multiplayer online games (MMOs) are an industry worth around $38 billion.
When this is combined with social gaming revenue and the continued increase in mobile gaming activity, Aristocrat’s Croker believes that the Plarium deal gives his company access to a market worth $54 billion.
New Opportunities for Plarium
For Plarium, the deal will allow it to enhance its current gaming provisions and, more specifically, draw on Aristocrat’s financial strategies.
As part of its MMO and strategy gaming model, Plarium offers free games such as Throne: Kingdom at War which allow players to build virtual worlds and interact with other players in the network.
As a source of revenue, in-game upgrades are available to buy. As a private company, Plarium doesn’t release its financial reports, but at least one of its games (Vikings: War of Clans) is ranked among the top ten online strategy games in the world.
Following the announcement, Aristocrat’s share price increased by 4.9 percent to $21.81 during early morning trading.