Playtika, Angry Birds Maker Rovio Halt Merger Discussions

Mobile gaming company Playtika (NASDAQ: PLTK) and Angry Birds producer Rovio Entertainment announced Wednesday they halted preliminary merger talks.

In January, Playtika revealed an increased, all-cash offer for the Finnish company, valuing it a $9.58 a share or a 55% premium to the stock’s last closing price before the offer was publicized. That was after Israel-based Playtika offered Rovio $9.18 a share last November.

Rovio announced on Feb. 6, 2023 that its Board of Directors has decided to commence a strategic review and that, as part of such review, Rovio has decided to enter into preliminary non-binding discussions with certain parties, including Playtika Holding Corp.,” according to a statement. “Preliminary discussions between Rovio and Playtika have now ended.”

No reason was given as to why the acquisition talks ended.

Angry Birds Was Alluring to Playtika

Formerly a unit of Caesars Entertainment, Playtika was one of the first to offer free-to-play social games on social networks and mobile devices, and has more than 35 million monthly users. Its well-known games include Bingo Blitz, Caesars Slots, Slotomania, and World Series of Poker (WSOP) Social.

Angry Birds, which Rovio describes as “one of the biggest mobile games and entertainment brand success stories of all time,” could alleviate those concerns. Interestingly, that was the 52^nd game produced by the Finnish company, which was on the brink of bankruptcy when it debuted the now-iconic franchise.

Angry Birds debuted in 2009 and hit 500 billion app downloads in 2011, and a billion the following year. Some game versions feature in-app purchases, which are central to the revenue thesis for some mobile game makers. The latest version of the game isn’t considered “freemium” — industry jargon for free premium.

Investors Punish Playtika

In January, an analyst criticized Playtika for boosting its offer for Rovio, citing margin dilution and adverse impacts on the buyer’s balance sheet, among other factors.

That might imply that investors are relieved that the suitor is walking from the bargaining table, but the reality is different as Playtika shares slumped more than 4% Wednesday on above-average volume. The shares are up 23.27% year-to-date.

The ended talks with Rovio mark at least the second proposed transaction that didn’t come to fruition. Last December, tech buyout fund Joffre Capital announced it scrapped plans to acquire a controlling stake in the gaming company.

Joffre highlighted internal issues at Playtika and problems with the seller of the shares, Playtika Holding UK II Limited (PHUK II), as reasons for walking away from the deal.