Sega to buy 'Angry Birds' maker Rovio

The Sega Sammy Holdings Inc. SGAMY -0.81% company recently agreed to pay nearly $800 million for the company behind the Angry Birds franchise. The deal is a landmark deal in the mobile gaming industry, as it ends with one of the most successful companies in the industry.

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This transaction is one of the latest consolidation moves in the broader gaming industry as a whole. Since the pandemic hit, sales of games played mostly on phones have dwindled, but they have risen in recent months.

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This has contributed to the growth of a string of bigger tie-ups among some of the gaming industry's giants, including Microsoft Corp.'s proposed $75 billion deal to acquire Activision Blizzard Inc. Another trail-blazing mobile game developer is Activision, the owner of the "Call of Duty" franchise as well as "Candy Crush."

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This agreement stipulates that Rovio Entertainment Oyj ROVIO 17.88%, based in Finland, will receive 9.25 euros for each share of the company that the Japan-based entertainment conglomerate holds. Compared to the closing price of the stock on Friday, the price at which the shares were offered represented a 19% premium, which represented a total value of €706 million, about $776 million in dollars.

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It was first reported on Friday that a deal was close to being finalized.

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Founded in 2004, Sega Sammy is a joint venture that combines the slot machine manufacturing company Sammy Corp. with Sega Corp., the videogame company famous for its “Sonic the Hedgehog” video game. The combined company offers various entertainment products, such as arcade games, toys, and animated video content, to its customers.  

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By leveraging the combined fan bases of the two companies, Sega plans to accelerate its expansion into the gaming sector as a result of the acquisition of Rovio. It is expected that the deal will be completed by the end of the third quarter, according to the companies.

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Angry Birds is a simple yet addictive game that was first released in 2009 when smartphones were still in their infancy. The game's goal is to knock out squadrons of green pigs trying to steal eggs from the players using a slingshot by firing birds over, under, and through various obstacles. 

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Rovio claims that it was the first mobile game to receive one billion downloads in its lifetime. There have been five billion downloads of games across the catalog of the company's gaming division according to information it released last year.

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A market insights firm, Data.ai, estimates that since the launch of the "Angry Birds" mobile game series in 2007, consumer spending on the series has surpassed $1.8 billion in total worldwide.

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Rovio has built upon the success of its original game by creating multiple sequels as well as TV spin-offs and movies following the success of the original game. In order to assist its growth plans, the company went public in late 2017, hoping that the listing would help it. 

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In spite of this, Rovio hasn't been able to replicate the success of "Angry Birds" with subsequent titles. As newer entrants took over the franchise, the company became vulnerable to a takeover attempt by a larger rival as a result of the franchise being eclipsed.

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As part of its plans to sell itself for more than $800 million to Playtika Holding Corp., an Israeli competitor, Rovio was previously in talks to sell itself. Negotiations between the two parties ended without a deal being reached in March of this year.

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In addition to the proposed deal, the industry is experiencing a slowdown in general. It is estimated that the sales of mobile games in the world declined 6.4% in 2012 to $92.2 billion, according to Newzoo BV, which estimates that mobile games will account for about half of all total sales of game software in the world, with most of the rest spent on consoles and computers. 

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There have been significant slowdowns in the industry since the pandemic, despite the fact that the industry has already experienced a surge in deal-making activity due to the pandemic. A year and a half ago, Take-Two Interactive Software Inc. agreed to buy Zynga Inc., another pioneering game maker, for an estimated $11 billion. 

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Almost immediately after that, Microsoft struck a deal with Activision to buy the company. There is a lot of regulatory scrutiny surrounding that deal both in the United States and overseas.

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Further to this, Sony Group Corp.'s videogame unit made an agreement last year to buy Bungie, a studio that created the "Halo" and "Destiny" series, for about $3.6 billion.