Social Games Provider, Zynga Inc, Acquires Turkish Mobile Game Developer, Peak, For $1.8 Billion

Social Games Provider, Zynga Inc, Acquires Turkish Mobile Game Developer, Peak, For $1.8 Billion
June 3, 2020

 

Social game services provider Zynga Inc (Nasdaq: ZNGA) is acquiring the Turkish mobile game developer, Peak, in a cash and stock deal worth $1.80 billion. In a separate press release, Zynga upwardly revised its outlook for the current quarter (2Q 2020) and fiscal year 2020. The upward revision does not include the impact of the Peak acquisition. Following the news, the shares of Zynga, which has a market cap of $9.20 billion, ended Tuesday’s trading session at $9.59, almost flat from the previous close.

The San Francisco, California based company stated that it would acquire Peak by paying $900 million in cash and the rest in the form of Zynga shares. Peak, popularly known for mobile games such as Toy Blast and Toon Blast, is backed by European venture capitalists such as Hummingbird Ventures and Earlybird. Sidar Sahin, founder and CEO of Peak, is the largest shareholder of the company.

The acquisition will enable Zynga to gain control of Peak’s game portfolio, which includes Toon Blast and Toy Blast. Both games command over 12 million DAUs (daily active users). Moreover, both games are of the highest-grossing apps in Apple’s store, with ranks in the top-10 and top-20 list for the past two years.

Notably, primary users of Peak are outside Zynga’s domestic market, namely the US, offering a real growth opportunity for the enterprise through cross-selling of other games. Zynga estimates that merging the games network of both firms will result in a 60% increase in mobile DAUs.

Zynga anticipates the completion of the deal in 3Q 2020. In particular, regarding the impact of Peak acquisition on revenues, Zynga anticipates that Peak’s portfolio will generate revenues of $40 million in 2020. Overall, Zynga expects revenues of $1.840 billion for FY20, including the contribution from Peak.

Currently, Peak has 100 employees working on various projects. So, even though the back office may merge, developers will continue to work without any change until the completion of pending projects.

In 2017, Zynga acquired Peak’s mobile card games division for $100 million. Following the takeover, Zynga gained control over games such as Spades Plus and Gin Rummy Plus, respectively, the most popular and successful spade and rummy mobile games across the globe during the period. Additionally, Zynga also received ownership of games such as 101 Okey Plus and Okey Plus, which were popular in Peak’s domestic market. As per a survey report by Apptopia, by 2019, Zynga was able to generate the sum they spent to acquire the mobile phone division, implying that the business has turned profitable.

Frank Gibeau, CEO of Zynga, welcomed Peak under its folds: “We are honored to welcome Sidar and team to Zynga. Peak is one of the world’s best puzzle game makers, and we could not be more excited to add such creative and passionate talent to our company. With the addition of Toon Blast and Toy Blast, we are expanding our live services portfolio to eight forever franchises, meaningfully increasing our global audience base and adding to our exciting new game pipeline. As a combined team, we are well-positioned to grow faster together.”

Sidar Sahin, founder and CEO of Peak, said, “This is a monumental partnership not only for Zynga and Peak, but for the whole mobile gaming industry. Both companies share a common vision — to bring people together through games. Peak’s culture is rooted in relentless learning and progress, so as we embark on this new chapter in our journey together with Zynga, we remain as committed as ever to our unique culture. We’re very excited about our combined future and what we will accomplish together.”

In a separate news release, Zynga upwardly revised its second-quarter revenue outlook to $430 million, an increase from the earlier level of $400 million. For the June quarter, the company is also looking at adjusted earnings of $35 million, compared with an earlier forecast of $32 million.

For fiscal 2020, Zynga intends to record revenue of $1.69 billion, an increase from its earlier outlook of $1.65 billion. The company anticipates bookings of $1.84 billion, compared with an earlier forecast of $1.80 billion. Additionally, for FY 2020, the company now expects adjusted earnings of $223 million, from the previous level of $210 million.

The acquisition news is expected to keep the stock of Zynga range-bound with a slight bullish bias.

Technically, the stock has broken above the resistance at 6.75 and is making new highs. Additionally, the Chaikin money flow indicator has a positive reading. Therefore, we are anticipating the stock to move up in the short-term.

zyn - technical analysis - 3rd June 2020

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

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Andrew Wright

Prior to founding tradersasset.com in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.


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