On November 12th, the mobile gaming conglomerate MTG (86.50 SEK) made headlines by acquiring the Israeli company Plarium. This strategic move solidified MTG’s position in the mobile gaming industry, as Plarium is a major player with 1,300 employees and revenue equivalent to 6.5 billion SEK.
Plarium’s flagship game, Raid: Shadow Legends, is a popular role-playing game that accounts for 70% of the company’s revenue. It consistently ranks among the top-selling games globally, attracting a dedicated player base. While Raid has maintained stable revenue over the past two years, it is no longer in a growth phase.
Based in Israel, Plarium also has employees in Poland, Ukraine, and Finland, with two-thirds of its revenue coming from Europe (37%) and North America (30%). The acquisition of Plarium will deplete MTG’s cash reserves and then some, but it will more than double the company’s revenue.
The acquisition price of 620 million dollars, or 6.8 billion SEK, was paid by MTG to Aristocrat Leisure, an Australian gaming and casino company. This deal expands MTG’s revenue to over 12 billion SEK, with a projected operating margin of around 20%. The transaction is expected to close in the first quarter of 2025, with MTG leveraging Plarium’s cash flow starting in Q4 2024.
While MTG will take on additional debt to fund the acquisition, the company’s strong cash flow and Plarium’s profitable operations make the debt manageable. With Raid as its flagship game, MTG anticipates steady revenue growth but recognizes the competitive nature of the mobile gaming industry.
Synergies between MTG and Plarium, such as Plarium’s distribution channel Plarium Play and marketing tool GoGame, offer potential benefits. However, uncertainties around Raid’s longevity and new game launches pose challenges. Despite this, the acquisition of Plarium stands on its own merits, with synergies seen as a bonus rather than a necessity.
Overall, the acquisition of Plarium positions MTG for growth in the mobile gaming sector, despite the industry’s recent stagnation. With a valuation multiple of around 7 times operating profit, MTG’s stock offers nearly 50% upside potential. In an optimistic scenario where the mobile gaming market improves, the stock could double in value.
In conclusion, MTG’s acquisition of Plarium showcases the company’s strategic vision and willingness to invest in high-quality assets. While risks remain, the potential for growth and profitability in the mobile gaming sector makes this acquisition a significant move for MTG’s future success.