Zynga to Buy Peak for $1.8 Billion in Its Largest Deal Ever

(Bloomberg) -- Zynga Inc. agreed to buy Turkish mobile-game maker Peak for $1.8 billion, making its biggest acquisition ever during an industry boom fueled by consumers staying at home with few live-entertainment options.

The deal is comprised of $900 million in cash and $900 million in Zynga stock, the San Francisco-based company said in a statement Monday. It's slated to be completed in the third quarter. The announcement confirmed an earlier Bloomberg News report.

The Peak deal will bring Zynga a popular lineup of puzzle games called Toon Blast and Toy Blast. The company is making the acquisition at a time when video-game companies are thriving along with purveyors of video and audio streaming, as the pandemic drives a search for diversions.

Zynga's shares were up as much as 4.5% to $9.57 in New York trading Monday. They were up 50% this year through Friday.

Zynga will pay Peak's owners 114 million shares priced at $7.92, the volume-weighted average closing over the past 30 trading days. Zynga will have $600 million in cash on its balance sheet after the deal, Chief Executive Officer Frank Gibeau said in an interview.

At $1.8 billion, the Peak purchase eclipses earlier transactions, including the 2018 deal to buy the majority stake in Finland's Small Giant Games for $560 million, according to data compiled by Bloomberg.

“Peak is an amazing founder success story ‘Made in Istanbul' and the first Turkish unicorn exit,” said Roland Manger, co-founder and partner of Earlybird Venture Capital, one of Peak's backers.

User Boost

The acquisition is expected to boost the number of average users playing Zynga's games daily by more than 60% by expanding its international audience, Gibeau said.

Zynga's acquisitions have been critical to its revenue growth and its successful turnaround under Gibeau who took over as CEO in 2016. The idea is to create a mini-empire of successful game studios that can make franchises that remain popular for years.

“If you think about where Zynga is positioned right now, you could argue that this is a transformational deal for us,” Gibeau said. “It'll basically add a third to our live-operations revenues and bookings.”

Revenue from live operations refers to sales made from purchases in games. He added that Peak could add about $300 million to Zynga's bookings in the second half of the year.

Zynga management first met Peak's co-founder and CEO Sidar Sahin in 2017, when Zynga bought Peak's casual card business for $100 million. It had also bought a company in Turkey's gaming scene before, having acquired Gram Games in 2018.

Deal Talks

Discussions about the bigger deal picked up at the end of last year with several trips back and forth between their respective headquarters in San Francisco and Istanbul, Gibeau said. When the pandemic hit the U.S. in March, both companies decided to keep negotiations going.

Peak should help Zynga expand its margins, Gibeau said. Even without those results, Zynga increased its revenue guidance for the second quarter and the full year, according to the statement, although it expects a wider second-quarter per-share loss.

What Bloomberg Intelligence Says
“Zynga's agreement to acquire Peak Games for $1.8 billion is a prudent acquisition that will boost annualized revenue by about 50%, based on SensorTower data, and drive meaningful EPS accretion. At about 2.7x trailing sales, the deal represents a discount to Zynga's 5.6x multiple and peer Glu Mobile (3.4x), but we await greater detail on Peak's financials and margins to fully gauge the impact.”
--Matthew Kanterman, technology analyst
Click here to read the research

Peak was founded in 2010 in Istanbul. Besides Earlybird, it's backed by venture capital firms Endeavor Catalyst and Hummingbird Ventures.

“The Peak team proved that we can produce tech unicorns in Turkey and this is a great milestone for the local ecosystem,” said Pamir Gelenbe, a partner at Hummingbird Ventures. He said the seed investors received a return of more than 200 times their initial investment.

Video-game companies have been taking advantage of the renewed interest in their products to do deals. Last month, AppLovin Corp. paid about $500 million for Machine Zone, Bloomberg News reported. Fortnite maker Epic Games Inc. has also been in fundraising talks.