TabTale in talks to buy Swedish game co

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The Tel Aviv-based app developer hopes Toca Boca's purchase for $60-120 million will drive it to the top of the digital charts.

Two years after "Globes" first covered TabTale, the Israeli startup which specializes in developing software for children the company is in the process of completing its largest ever deal and purchasing a competitor worth $60-120 million.

The Israeli firm is currently negotiating the buyout of Toca Boca, a Swedish studio developing educational applications and games, which had been recently been put on the market by its parent company Bonnier Media Group.

TabTale did not respond to the report.

Toca Boca has developed dozens of mobile games and has registered 70 million downloads. The company, which markets both free and paid apps, saw its net profits rise by 28% in 2014 up to $10 million, according to a Guardian report.

However, the business model relying on paid apps did not succeed for a prolonged period for the company, which led to its position on the auction block.

The Swedish firm, with its 25 employees, had wanted to expand beyond the gaming world and hired a veteran digital professional from "Sesame Street" in April in hope of developing an alternative for kids and their parents to Netflix and Amazon.

TabTale was founded in 2010 by Sagi Schliesser, Oran Kushnir, and Nir Bejerano, and has recently been considered as one of the leading app developers and distributors in the world.

According to a ranking by research firm App Annie, TabTale places in 6th among the top developers in the App Store and Google Play markets, with 660 apps distributed. It leapt passed established players like Angry Birds' Rovio, Disney, and Glu, which developed the hugely successful Kim Kardashian game.

"The way we look at it, it is definitely an achievement to leapfrog players like Disney or Rovio or King which develops Candy Crush but that's not our aim. Our goals is to be first place," Kushnir told "Globes" in an interview two years ago, correctly predicting his current predicament, stuck in the rankings behind King, Electronic Arts, and Gameloft.

TabTale has raised $13.5 million so far from venture funds Magma VC, Qualcomm Ventures, and Vintage. "Globes" was informed that the company would soon complete another round of funding worth several dozen million dollars.

It is unclear whether the funding will be completed before the Toca Boca purchase, but the fact that TabTale has been profitable since the end of 2012 offers it limited flexibility in how it uses its earned funds.

In either scenario, when startups turn profitable, later rounds of funding are used to pay for expansions and, in some cases, buyouts. In 2013, the firm finished the year with revenue of $15 million. At the time, TabTale CEO Schliesser told "Globes" that "we have reached a stage where our ROI is two days in two days we earn back the cost of developing a game we worked on for months."

This is not TabTale's first purchase of a competing gaming company but it is definitely the largest acquisition.

In January, the firm announced it bought Serbian studio Level Bit for several million dollars and in April it announced the acquisition of American firm Sunstorm Games for $6 million.

In May 2014, TabTale acquired China-based Coco Play for close to a million dollars; in 2013, it purchased Israeli company Kids Games Club for an undisclosed sum.

The target audience for TabTale's games is between the age of 7 and 13; in a past interview with "Globes" the management team said the firm releases close to a game a week. "Kids love to download apps much more than adults, but they also get bored more quickly because they will not play only one game every day for six months," said Kushnir.

Published by Globes [online], Israel business news - www.globes-online.com - on September 2, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

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