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Thursday, Jun 13, 2024

Scopely Sells for $4.9 Billion

With its pending acquisition of local video game developer Scopely, Savvy Games Group is becoming a new, aggressive player in the industry.  Savvy, owned by Saudi Arabia’s Public Investment Fund, agreed April 5 to purchase the Culver City mobile game maker for $4.9 billion.

The deal follows Savvy’s acquisition of Vindex, a global esports technology and infrastructure company in New York, through its subsidiary ESL Faceit Group. The deal took place last month.

Michael Pachter, managing director of equity research at Wedbush Securities in downtown Los Angeles, said Savvy has a lot of money, and is trying to buy companies that make money.

Scopely has revenue of $1.5 to $2 billion annually, Pachter said, adding he had no idea if Savvy had revenue at all and he suspected that if the company did it would be inconsequential.

“They’re an acquisition company that will manage the assets acquired,” Pachter said.

Big investors

The investment fund, controlled by its chairman, Mohammed bin Salman, who’s both the prime minister and crown prince of Saudi Arabia, has about $620 billion, of which $38 billion has been provided to Savvy, founded in Riyadh in January of last year.

Both the fund and Savvy have invested in U.S., European and Japanese video game companies. It is part of bin Salman’s attempt to diversify the country’s economy away from oil.

An example of some of the game titles from Scopely.

Last year, for instance, the fund invested in Capcom Co. Ltd., Nexon Co. Ltd. and Nintendo Co. Ltd., all at a 5% stake for a combined amount of nearly $1.5 billion. Also last year, the Electronic Gaming Development Co., a subsidiary of the Mohammed bin Salman Foundation, acquired a roughly 96% stake in Japanese game developer SNK Corp., known for the “King of Fighters” and “Samurai Shodown” game franchises.

And in late 2020, the fund invested more than $3 billion in three U.S. based gaming companies: Activision Blizzard Inc. in Santa Monica, Electronic Arts Inc. in Redwood City and Take-Two Interactive Software Inc. in New York City.

In June of last year, Savvy invested $1 billion into Swedish game developer Embracer Group.

Lars Wingefors, founder and chief executive of Embracer, said over the past few years Saudi-based entities have become one of the most significant investors in the global gaming market.

The games market in the Middle East/North Africa area or MENA is one of the world’s fastest growing, with $5.7 billion in 2021 revenues and more active gamers than either the U.S. or Western Europe, Wingefors said.

According to a PocketGamer.biz article, the MENA region has 377 million estimated gamers. Comparativley, Europe has 386 million players and the U.S. has 210 millon gamers.

Scopely’s offices in Culver City

“Our relationship with Savvy Gaming Group will enable us to set up a regional hub in Saudi Arabia, from which we will be able to make investments across the MENA region, either organically, via partnerships, joint ventures, or via acquisitions of companies led by strong entrepreneurs,” he added in a statement.

In September, bin Salman unveiled his country’s plans to turn it into the global hub of gaming and esports.

“The National Gaming and Esports Strategy is driven by the creativity and energy of our citizens and gamers, who are at the heart of the strategy,” bin Salman said in a statement. “We are delivering on the ambitions of the gaming community in Saudi Arabia and around the world, with an exciting new career, and unique entertainment opportunities, aiming to make Saudi Arabia the ultimate global hub for this sector by 2030.”

Creating opportunity

Wedbush’s Pachter said he thought Savvy was formed to buy big game development studios that could employ teams in Saudi Arabia.

“I expected them to buy console developers (200 to 400 person teams), rather than mobile (much smaller teams, typically 20 to 50 people),” Pachter said.

What the Scopely/Savvy deal means for other video game company owners, is that there is a viable buyer out there should they choose to sell.

“It creates an opportunity that there is a deep pocketed interested acquirer out there,” Pachter said “The Saudis have added a whole new opportunity to anybody who owns a studio that may want to exit.”

That included Walter Driver and Javier Ferreira, the co-chief executives of Scopely.

Driver said the deal with Savvy will allow the company to continue to grow.

“We will be able to further expand the possibilities of play, continuing to develop beloved game experiences for players around the world,” he said in a statement. “This transformational partnership is a great validation of the incredible talent of our entire Scopely team and will further accelerate our efforts to drive the games industry forward.”

As part of the Savvy Games Group portfolio, Scopely will continue to build one of the world’s most diversified mobile-first games companies, Ferreira said.

“Our technology platform, market-leading studio ecosystem, and world-class team have always enabled us to stay one step ahead of the rapidly growing games industry, delivering long-lasting franchises that delight players around the world,” he added in a statement.

As an autonomous operating company under the Savvy umbrella, Scopely will benefit from Savvy’s long-term patient financial backing to aid in its growth and deepen existing franchises, unlock new player audiences through innovative game experiences and work with the best talent and studios across the industry through strategic partnerships and acquisitions, according to a release from the company.

Brian Ward, chief executive of Savvy, said that it looked forward to further accelerating Scopely’s ambitions and working together with its team of developers, designers and publishers to create new products for the gaming community across the world.

“At Savvy Games Group, our mission is to invest in – and grow – the global games community by inviting the best minds to join us,” Ward said in a statement. “Under Walter and Javier’s stewardship, Scopely has proven to be an exceptional leader and will continue to revolutionize the future of games for years to come.”

Other deals ahead?

One big deal already in the works. Microsoft Corp. is in the process of buying Activision Blizzard Inc. for $69 billion. The Federal Trade Commission in December filed a lawsuit to prevent the transaction from taking place.

Some other multi-billion-dollar deals for video game companies other than Scopely include Sony Interactive Entertainment LLC acquiring Bungie Inc., the maker of the “Halo” franchise, for $3.7 billion in July and Take-Two completing its $12.7 billion acquisition of mobile games giant Zynga in May of last year.

With only a limited number of buyers, though, Pachter doesn’t foresee another big, billion dollar deal happening soon, although smaller ones could.

“That is a lot for the number of companies out there,” Pachter said, adding that there are plenty of privately owned companies that could be acquired.

“Jam City, in Culver City, they are close to Scopely and are only a mile apart, they are the other one that (I’d be interested in) if I were the Saudis,” he said. Jam City is the company behind hit mobile game “Harry Potter: Hogwarts Mystery.”

There are also some smaller publicly traded game companies out there, including Playstudios Inc. in Las Vegas and Double Down Interactive Co. Ltd. in Seattle, Pachter said.

“The small ones make more sense (to acquire) because they are bite sized and it doesn’t cost billions to buy them,” he added.

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MARK R. MADLER Author