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Zynga to buy Finland-Small Giant Games for $560 million

(Reuters) – FarmVille-maker Zynga Inc (ZNGA.O) said on Thursday it would buy a majority stake of Small Giant Games, maker of the popular Android game Empires & Puzzles, for $560 million in a move to strengthen its mobile portfolio.

The Zynga logo is pictured at the company’s headquarters in San Francisco, California on April 23, 2014. REUTERS/Robert Galbraith/File Photo

It is Zynga’s largest deal to date, Chief Executive Frank Gibeau said in an interview, topping the $527 million acquisition of the UK developer Natural Motion in 2014.

Zynga also raised its financial forecast on Thursday, sending the shares up 1.67 percent in after-market trading, to $3.65.

Zynga sees potential in expanding of Helsinki, Finland, on the basis of Little Giant Empires & Puzzles by bringing it to countries in Asia, where role-playing games are popular, with Gibeau citing Japan, South Korea and China as potential markets.

He said the 18-month-old game is profitable, making money from player purchases of items in the game, plus a small amount of advertising. The acquisition is expected to add to Zynga’s profit in 2019.

Zynga is looking for new games to spark growth after a difficult year. Gibeau says the company was finally emerging from the turnaround. The shares are down 10 percent year-on-year.

The cash-and-stock deal for Little Giant, which will be closed on Jan. 1, follows Zynga’s announcement last year to buy Peak Games, the home of successful games such as “Spades Plus” and “Gin Rummy Plus” for $100 million.

Zynga said it would buy 80 percent of private Small Giant, now for $560 million, and the remaining 20 percent in the next three years on the basis of the profit targets.

The little Giant has raised just under $50 million in venture capital funding and is supported by EQT ventures.

Zynga has in the fourth quarter revenue forecast, crediting the popularity of the games “Words With Friends”, “the Merging of Dragons!” and “CSR2” during the holiday season.

It now sees revenue of $243 million, against a previous expectation of $235 million, while the net loss forecast was lowered to $1.5 million from an earlier outlook of $2 million.

Reporting by Vibhuti Sharma in Bengaluru and Liana B. Baker in New York; Editing by James Emmanuel and Leslie Adler

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