Zynga to buy Finland's Small Giant Games for $560 mln

By Vibhuti Sharma and Liana B. Baker

Dec 20 () - U.S. game software firm Zynga Inc said on Thursday it would buy a majority stake in Finland's Small Giant Games, maker of the popular Android game Empires & Puzzles, for about $700 million, in a move to strengthen its mobile game portfolio.

It is the largest deal to date for Zynga, Chief Executive Frank Gibeau said in an interview, topping its $527 million acquisition of UK developer Natural Motion in 2014.

Zynga sees potential in bringing smartphone role-playing game Empires & Puzzles to countries in Asia where games of the type are popular, with Gibeau citing Japan, South Korea and China as potential markets.

He said the 18-month-old game was profitable, making money from in-game purchases plus a small amount of advertising. The acquisition is expected to add to Zynga's earnings in 2019.

Under Gibeau, who became CEO in 2016, San Francisco-based Zynga has tried to revamp itself as a mobile-focused games maker and is looking for new games to spark growth after a challenging year that saw earnings disappoint. Its shares are down 10 percent year-on-year.

The cash-and-stock deal for Small Giant, which is expected to close on Jan. 1, follows Zynga's deal last year to buy Peak Games, home to games such as "Spades Plus" and "Gin Rummy Plus," for $100 million.

Zynga said it would buy 80 percent of privately-held Small Giant now for $560 million and the remaining 20 percent over the next three years based on profit goals. The implied value of the deal is $700 million, although the final number could vary based on how Small Giant performs.

Small Giant has raised just under $50 million in venture capital funding and is backed by EQT Ventures.

In raising its fourth-quarter revenue forecast, Zynga credited the popularity of its games "Words With Friends," "Merge Dragons!" and "CSR Racing 2" during the holiday season.

It now sees revenue of $243 million, up from an earlier expectation of $235 million, while its net loss forecast was lowered to $1.5 million from an earlier $2 million.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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