Caesars Interactive Entertainment (CIE) has sold its social mobile gaming arm Playtika for a staggering $4.4 billion to a consortium of Chinese investors that includes Alibaba founder Jack Ma. The all-cash deal was announced on July 30 and remains subject to regulatory approvals.
Caesars’ World Series of Poker brand and the company’s other real money gaming platforms are not included in the transaction.
Ma partnered with Shanghai Giant Network Technology, one of China’s largest online gaming companies, to complete the acquisition. China Oceanwide Holdings, China Minsheng Trust, CDH China HF Holdings, and Hony Capital Fund are also invested in the deal.
“It has been a particularly rewarding experience growing Playtika from a 10-person start-up when CIE acquired them in 2011,” CIE CEO Mitch Garber said. “Playtika today is a highly profitable growth company with more than 1,300 employees.”
Headquartered in Israel, the new Chinese ownership says it will continue to operate Playtika from its current location and keep the business independent.
Online poker fans no doubt remember the price Amaya paid for PokerStars and Full Tilt in 2014: $4.9 billion.
No Impact on US Poker
Since the WSOP.com network isn’t being sold, online poker players in New Jersey, Nevada, and Delaware won’t be affected by the transaction.
The Chinese investors are buying Playtika’s social game offerings like Slotomania, House of Fun, and Bingo Blitz. Though no real currency is gambled with on the Playtika portfolio being acquired, the games have been generating substantial revenue for CIE.
More than six million people play Playtika games on a daily basis. Its users are spread across 190 countries and communicate in a dozen languages across 10 platforms.
Playtika generates income from its social games through in-app purchases.
While Caesars Interactive Entertainment’s parent company filed for Chapter 11 bankruptcy protection in 2015, the social and mobile gaming wing performed extraordinarily well. Revenues for CIE were up nearly 31 percent in 2015, with the unit posting $785.5 million in income.
Caesars Entertainment Operating Group, the restructuring group formed in 2015 to separate assets and liabilities, reportedly holds $18 billion in debt.
Selling its most profitable subsidiary brings a quick influx of much needed cash.
Gambling is illegal under Chinese law, the three exceptions being the state-run lottery and two special administrative regions in Macau and Hong Kong. Since social gaming doesn’t involve actual currency, playing slots and other games on mobile devices isn’t technically banned.
Paying $4.4 billion for a network of interactive games that are essentially free is still a steep price. Social gaming has turned out one mammoth headline after another in recent years.
Last November, Activision announced it was buying King Digital Entertainment, software developers of Candy Crush, for $5.9 billion. With the Pokémon Go craze the latest free-to-download game taking the world by storm, snagging up popular titles from Caesars Interactive Entertainment, regardless of a multibillion-dollar price tag, might seem like a sound investment.
But there are plenty of horror tales, too.
Zynga is the most notorious social gaming company that once had all the promise investors seek when evaluating startups.
Famed for its FarmVille, Words with Friends, and Zynga Poker, the San Francisco company was once traded on NASDAQ at nearly $15 per share. Today, a share can be bought for less than $3.