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Is Zynga eyeing Glu Mobile as another acquisition?

Only a week ago it spent $180 million on OMGPOP

Financial trends and news by Steven Loeb
March 28, 2012 | Comments
Short URL: http://vator.tv/n/2589

It looks like Zynga may soon be at it again! The San Francisco-based social gaming giant is now rumored to be going after yet another rival game developer, only days after spending $180 million to buy OMGPOP, the makers of the hit mobile game Draw Something. 

This time it is Glu Mobile, makers of “Contract Kill: Zombies” and Gun Bros.”

Zynga has a history going out and purchasing developers of hot new games. It bought 15 companies in 2011. And, in 2010, it spent $53.3 million buying Texas-based mobile game developer Newtoy, developers of Words with Friends. In all of 2010, Zynga bought seven companies.

The gaming space has seen a frenzy of acquisitions.

From 2010 to 2011, there was a major leap in both the number of game mergers and acquisitions, and in the transaction value. The number of transactions tripled from 40 to 120, and the value of the transaction went from $45 million to $120 million.

Among some of the bigger acquisitions include DeNA'a aquisition of ngmoco for $400 million in October 2010 and  EA's purchase of PopCap for $650 million in July 2011. Then there was IGT's $500 million purchase of Double Down, which was estimated to be generating $50 million a year in revenue. This deal was done in January. On the smaller but notable end, Big Fish Games bought Self Aware Games for an undisclosed amount.

After raising $1 billion in its 2011 IPO, Zynga it has a lot of cash in the bank. And it is spending that money taking over all of its chief rivals.

A little Glu background

Glu has been around since 2005, a result of a merger between San Mateo-based Sorrent and London based Macrospace. Last week, based on the speculation of the Zynga takeover, Glu saw its stock rise 21% just last week, from $4 to $4.85. In the past two and a half years Glu has seen its stock hit a high of $6.10, to a low of $1.80.

Glu Mobile generated some $66 illion in revenue in 2011. It's current market cap is $319 million. That means, it's trading at around 5x trailing sales. That's pretty low compared to the 10x multiple IGT paid for Double Down. 

In the meantime, Zynga’s stock has been faring much better.

The company went public on December 16, initially closing at $9.50. Then the company saw its stock jump15% in February after Facebook filed for its IPO and revealed Zynga’s contribution to the company. Zynga stock hit its peak earlier this month at $15.41 after announcing its own gaming platform.

It was recently announced that Zynga would be selling 15% of its shares, worth around $227 million, causing the stock to drop 5% in one day.

Neither Glu Mobile nor Zynga were not immediately available to comment.  

(Image source: edge-online.com)

 


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