Sega Offers $776 Million for Angry Birds Maker Rovio

Angry Birds game characters at the Rovio headquarters in Espoo, Finland, on March 13, 2019. (Anne Kauranen/Reuters)

Sega Sammy Holdings has made an offer to acquire the Angry Birds mobile game creator Rovio Entertainment, which admitted being in talks over a possible offer.

The Wall Street Journal had earlier reported on April 14 that a potential $1 billion deal between the two companies was close.

The Japanese company confirmed its bid to buy the Finnish game company for $775.8 million, according to a joint statement by both firms on April 17.

Sega said it will offer €10.15 per share for Rovio, an increase of 19 percent over the closing price of €8.53 at the end of trading last week. according to the Tokyo based company.

Shareholders controlling 49.1 percent of Rovio, including the Hed family, who founded the company, unanimously supported the offer, according to an official announcement over the weekend after conducting a strategic review.

Israeli gaming company Playtika had made an earlier preliminary bid in January to buy Rovio for $810 million, but the attempt to arrange a deal fell through last month.

The Angry Birds maker said on March 22 that it had ended talks with Playtika, but was continuing discussions with other undisclosed parties.

Rovio has not commented on why it rejected Playtika’s bid, but Finnish analyst Atte Riikola said in January that the Israeli firm’s history of buying game studios and then closing their local offices was a likely reason why the Hed family, which still controls a 39 percent stake in the company, decided against it.

Reliance on Successful App Franchise Threatens Rovio’s Future Earnings

Rovio’s products have been downloaded more than five billion times, but its popular and best-selling Angry Birds game franchise remains the cornerstone of the Finnish company’s operations.

It was the first mobile game to reach one billion downloads, allowing the once small Finnish developer to go public in 2017, with an initial market value of about $900 million.

Rovio executives have called Angry Birds, which brought the firm to prominence in the crowded gaming market, its “most precious asset. The game brand been licensed out for entertainment purposes and consumer products.

Licensing fees for the Angry Birds franchise have brought in revenue from entertainment projects, such as a Netflix series and two films, along with royalties from consumer products.

Angry Birds was first released in smart phone app stores in 2009 and has generated more than 80 percent of Rovio’s gross earnings.

However, Rovio’s first months on the stock market after its IPO five years ago were a disaster. Investors watched as the company’s stock slumped when early financial disclosures disappointed shareholders, and the Finnish developer never fully recovered its losses.

Rovio developed over 50 games in its early years before finding a hit with Angry Birds over a decade ago by capitalizing on the iPhone’s then revolutionary touchscreen technology.

Meanwhile, the company’s heavy reliance on the Angry Birds franchise has worried investors, as the company attempts to expand its other brands and develop new games.

According to its latest annual report, Rovio has several new games in development and has acquired smaller rival gaming studios to expand its market presence.

Sega to Create ‘Significant Synergies’ Within Gaming Market

Sega has been expanding its console and smartphone gaming departments for long-term growth, as its traditional arcade machine franchises face dwindling audiences, worsened by pandemic-related restrictions.

Some of its best-known video games brands include Sonic the Hedgehog, Crazy Taxi, and Yakuza.

“Among the rapidly growing global gaming market, the mobile gaming market has especially high potential, and it has been Sega’s long-term goal to accelerate its expansion in this field,” said Sega CEO Haruki Satomi.

“Through combination of both companies’ brands, characters, fanbase, as well as corporate culture and functionality, there will be significant synergies created going forward.”

Sega reported offered a premium of 63 percent compared to Rovio’s closing price on Jan. 19, prior to Playtika’s offer, which is about 19 percent relative to the closing price on April 14.

The Japanese company plans to start its offer around May 8 and is expected to be complete it in the third quarter of this year.

Reuters contributed to this report.