Bally Technologies Dragonplay

Bally Technologies may be a latecomer to the social gaming market, but the investment community think it got itself a good deal with its Dragonplay purchase .(Image: Bally Technologies)

Bally Technologies is after its own piece of the social gaming pie: the Las Vegas-based slot machine giant has announced that it will acquire the successful Israeli social games developer Dragonplay for $100 million.

Dragonplay has some 700,000 active daily users and 3 million monthly users spread across its suite of games that includes Live Holdem Pro, Dragonplay Slots and Wild Bingo. The company’s Farm Slot game is the number one “Top Free Game” in the Android market, and it’s considered one of the industry’s top 10 grossing social games developers, having generated more than 10 million in cash flow last year.

“We expect this strategic acquisition to help position Bally at the forefront of social casino gaming,” said company CEO Richard Haddrill. “Dragonplay has proven remarkable foresight and leadership in the mobile space, which is the fastest growing segment of social gaming.”

Late Starters

“We believe the price is reasonable, the deal makes strategic sense – putting proprietary Bally slot content on the Dragonplay platform – and gives Bally an additional growth driver,” said JP Morgan gaming analyst Joe Greff at a meeting of investors. While the investment community generally agrees that this is a good deal for Bally, it’s a late entry to a market which is already expected to be worth billions of dollars.

In fact, Caesars Interactive Entertainment embraced social gaming way back in 2011, when it acquired social casino games developer Playtika, a small start up, for $90 million, in the process announcing that its long-term ambition was to become “the number one in casino and social games on Facebook”.

Since then traditional gambling companies across the globe have been eagerly investing in and acquiring social gaming platforms so that, today, almost all major online gambling operators have some kind of social casino presence. Eyebrows were raised in 2012, when Bally’s rival slot developer IGT, purchased social casino Doubledown for a deal worth well over $400 million.

Market Worth $17.4 Billion By 2019

The extraordinary speed of the uptake of smartphone, tablets and mobile devices has seen the industry rocket in recent years, and fortunately for Bally, it’s showing no sign of slowing. According to a recent report, the social gaming market is expected to grow at a compound annual growth rate of 16.1 percent in five years, which means that it could climb from $5.40 billion to $17.4 billion in 2019.

“We expect today’s announcement to bring out the skeptics, especially those who had gravitated toward Bally, given management’s decision to steer clear of deploying excessive capital into the relatively unproven social gaming space,” said Steven Wieczynski, gaming analyst at Stifel Nicolaus. “The Dragonplay deal’s attractive multiple eases some of our concerns.”

Credit Suisse gaming analyst Joel Simkins agreed: “Based on a discussion with the company, the acquisition was in the works for months and Bally has previously scouted out a number of social platforms,” he said. “With the social gaming business here to stay, Dragonplay provides Bally an immediate entry into the only vertical it was missing at a fair price.”

And so did investors – Bally Technologies’ shares on the New York Stock Exchange increased 0.95 percent late last week to close at $57.48.