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Aristocrat Leisure (ASX: ALL) has sold one of its key video game businesses, Plarium Global, in a deal worth up to US$820 million ($1.25 billion), or more than 80 per cent above book value, with the company planning to use the proceeds to shore up its core gaming machine and real-money gambling divisions globally.
Plarium Global, a division of Aristocrat’s mobile game developer Pixel United Holdings, is being acquired by Swedish digital entertainment company Modern Times Group for an upfront payment of US$620 million ($943 million), and a contingent consideration of up to US$200 million ($304 million) subject to the business achieving set financial targets between 2025 and 2028.
The price secured by Aristocrat compares with a book value of US$450 million ($684 million) for the business at the end of September this year, although the company says it the net gain from the sale has yet to be determined.
The sale follows a strategic review by Aristocrat Leisure of its group operations in May to maximise shareholder value.
Aristocrat Leisure acquired Plarium Global, which is developer of games such as Soidiers Inc., Stormfall: Age of War and Vikings: War of Clans, in 2017 and later that year added Big Fish Games to its games portfolio.
Big Fish Games is also potentially up for grabs as part of the strategic review despite the company earlier this year declaring that both Big Fish and Plarium have added “significant scale to Aristocrat’s Social Casino and broader digital offering”. Plarium generated an internal rate of return (IRR) in the mid-teens under Aristocrat’s ownership.
“With the expanded Aristocrat Interactive business now sitting alongside Aristocrat Gaming and our market leading mobile social casino business, we are increasingly focused on opportunities to lean into Aristocrat’s strengths in regulated gaming content and social slots,” says Aristocrat CEO Trevor Croker.
“Aristocrat has incorporated a range of Plarium’s strategic capabilities and mobile content know-how into its core gaming operations over the past seven years, benefitting from digital marketing and UA management capability, enhanced live operations, and scaling and growing our combined social casino business.
“We are pleased also to have achieved an IRR from the acquisition of Plarium in excess of our target rates.
“Our ownership of Plarium has helped to drive Aristocrat's digital transformation, extending our track record of successfully acquiring businesses to accelerate our strategy.”
Modern Times Group is a global mobile-first gaming group with an extensive portfolio of game franchises including Forge of Empires, Elvenar and Tribal Wars.
The Sweden-based company says the acquisition provides scale with “multiple avenues to deliver synergies” while also substantially improving its strong cash flow generation.
Unaudited financial results for the year to 30 September 2024, reveal that Plarium contributed about US$615 million ($935 million) to Pixel United’s revenue and about US$166 million ($252.4 million) to segment profit.
Aristocrat says the sale will be “mid to high single-digit percentage points dilutive” to group net profit after tax in FY25.
Proceeds from the sale of Plarium will be used by Aristocrat to focus on growth across the regulated gaming sector in core land-based gaming, real money gaming and social casino opportunities.
Meanwhile, Aristocrat Leisure says its strategic review of Big Fish Games, which excludes the Big Fish Social Casino assets, is still under way with the company revealing it is actively engaged with third parties.
The gaming machine group plans to make a goodwill impairment charge of about US$110 million ($167 million) against Big Fish Games, excluding the Big Fish Social Casino assets, which it says “continue to perform well and are a core component of Product Madness, Aristocrat’s social casino business”.
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