One can argue about the IPO of Zynga Inc. (Nasdaq: ZNGA), the giant Internet gaming company, but one cannot question the company's success and that it has become a role model. Zynga succeeded in addicting a million people around the world to the green pastures of FarmVille, while simultaneously inspiring a slew of young companies. One of these is Israeli game company Playtika Ltd., which was founded just 18 months ago, and began marketing the two games it developed a year ago.
Playtika's success has been amazing, and the company that decided to take a chance with it is US casino giant Caesars Entertainment Corporation, the largest player in the industry. Last May, Caesars acquired 51% of Playtika at a company value of $80-90 million, and received an option to acquire the balance of shares within two years. Caesars did not wait long. Sources inform ''Globes'' that Caesars acquired the balance of Playtika shares for a slightly higher value than its value when the first investment was carried out.
The acquisition of Playtika is amazing on almost every possible level - it is the largest exit ever in the Israeli gaming and gambling industry. Caesars is not just another company, and almost everyone who has been to Las Vegas knows that it is the largest and best-known casino operator in the world. The US does not allow internet gambling within its borders, but big players like Caesars know that the Internet is the future, and they are trying to integrate their extensive experience and strong brand name with social network games, while simultaneously operating online gaming outside US borders.
Playtika will operate within Caesars' unit Caesars Interactive Entertainment.
The timing is no coincidence
"It is no coincidence that we chose to acquire the balance of Playtika shares now," Caesars Interactive CEO Mitch Gerber told "Globes" in an exclusive interview from his home in Canada. "Playtika's activity is advancing according to our plans, and company growth has been consistently strong. We have learned that controlling a portion of a company's shares it not the same thing as having complete control. The integration of Playtika and Caesars Interactive was important for Playtika's long term growth, and required additional investment that the current shareholders were not sure they wanted. We reached the conclusion that we prefer acquiring full control of the company before it is too late, which will enable us to fully integrate it within Caesars Interactive. We have many plans for the future."
When Gerber talks about current shareholders, he is referring to Playtika co-founders COO Uri Shahak, the son of former IDF Chief of Staff Amnon Lipkin-Shakak, and CEO Robert Antokol, who previously founded game company Cmate SA, which he sold to Oberon Media Inc. six years ago. Shahak was previously a senior games manager at Israeli gambling company 888 Holding plc (LSE:888).
Shahak and Antokol have the largest equity stake in the company, which means that they will receive tens of millions of dollars from the current deal. Other investors include former 888 CEO Gigi Levy (Shahak's former boss), 888 investor Ofer Lezovsky, former Empire Online VP marketing Avner Yasur, as well as real estate developer Igal Ahouvi, Yariv Gilat, Dafna Weiss, and Domaine du Castel winery founder Eli Ben-Zaken. They will each receive a few million dollars from the sale.
Playtika currently employs 50 people, but Gerber says that this number will rise over the coming year. "2012 is going to be a very big year for Playtika, which will be reflected by, among other things, the hiring of additional employees in Israel. A large portion of the investment that we are making in the company will be for hiring new people," he said.
Playtika currently offers two games of chance: Slotomania, which is a slot machines game, and Farkle, which is a game of dice. Gerber promises that additional games will be launched in the near future.
Gerber has not disclosed details about Playtika's profit or revenue, but analysts estimate that its revenue is a few million dollars a year, and growing. Playtika currently has 10 million unique users every month, half of whom are from Facebook. The company, in contrast with Zynga, also markets its games on the Russian Facebook equivalent, V kontakte.
"Next year, we will concentrate on Playtika's competitive advantage and on widening its activity on social networks other than Facebook," Gerber said. "Caesars Interactive and Playtika will be focusing on Asia in the upcoming year." Gerber says that every game that is developed by Playtika for the Asian market (China or Turkey, for example) will be customized to the specific culture of that country.
This is Caesars' first Israeli acquisition, but Gerber's second. When he was CEO of PartyGaming, the company acquired what remained of Empire Online for $40 million. "I love Israel, and I love doing business there," Gerber said. "I think Israel has the best start-up companies in the world, and I am proud that I brought Caesars here."
Which Israeli company are you going to acquire next?
"I haven't found one yet, but I assume that I will, and therefore I am taking advantage of this public forum to announce: I am interested in acquiring additional Israeli companies."
Published by Globes [online], Israel business news - www.globes-online.com - on December 22, 2011
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