Playtika Could Be Target of Private Equity Firms

Posted on: April 10, 2023, 04:46h. 

Last updated on: April 10, 2023, 05:00h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Shares of mobile games developer Playtika (NASDAQ: PLTK) jumped 1.97% Monday on volume that was nearly quadruple the daily average amid speculation that private equity companies could be eyeing the Israeli firm as a takeover target.

Joffre
Playtika highlighted at the Nasdaq market site. Private equity firms might be interested in buying the company. (Image: Wall Street Journal)

Citing unidentified sources with knowledge of the matter, Bloomberg broke the news earlier on Monday. An agreement hasn’t been reached and it’s possible that won’t happen, according to the news agency. Potential suitors for Playtika weren’t identified.

The news arrived less than three weeks after Playtika and Angry Birds producer Rovio Entertainment announced they scrapped initial conversations regarding a merger. It’s not apparent whether or not the collapse of those negotiations stoked fresh interest in Playtika, but the suitor came under fire from some analysts earlier this year for boosting its offer for Rovio.

Formerly a unit of Caesars Entertainment, Playtika is the developer of popular social casino games, including Bingo Blitz, Caesars Slots, Slotomania, and World Series of Poker (WSOP) Social, among others.

Playtika Ripe for Transaction

It’s been 14 months since Playtika announced it’s considering strategic alternatives, including a possible sale.

As is usually the case with such headlines, the gaming company’s shares rallied immediately following that news and it appeared the evaluation process would soon bear fruit when technology buyout fund Joffre Capital announced it would take a controlling stake in Playtika last June.

That transaction was halted last December after Joffre Managing Partner and co-founder James Lu resigned from the Playtika board, citing a lack of independence among directors. He also cited “conflicts of interest driven by the Board being largely controlled by Company management” and “lapses and communications failures as a result of structural issues within the Board.”

Perhaps surprisingly, shares of Playtika are up 42.4% since news of Lu’s exit emerged, but the stock remains lower by 37.9% over the past 12 months.

What Private Equity Might Want with Playtika

Private equity has long-running ties to the gaming industry, some of which remain in place today. Specific to Playtika, the company’s market capitalization of $4.28 billion makes it easily affordable for any number of buyout firms.

Making Playtika potentially attractive to prospective buyers is the opportunity to better monetize the gaming company’s offerings and boost monthly average user (MAU) engagement. Buyout shops could also be drawn to the growth prospects of social casinos and in-app business models.

Some on Wall Street are optimistic about the future of select companies in this space. They note soaring in-app purchases, the catalyst of new game introductions, and expansion opportunities that aren’t currently reflected in share prices. It adds up to an industry that appears ripe for mergers and acquisitions activity.

The sources cited by Bloomberg didn’t mention a timeline for a potential takeover announcement.