Sega Sammy Holdings in Talks to Acquire Angry Birds Creator Rovio Entertainment for $1 Billion

Highlights

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• Sega Sammy Holdings Inc is in talks to acquire Rovio Entertainment Oyj, the Finnish company behind Angry Birds, for about $1 billion.
• Rovio has struggled to replicate the success of Angry Birds with other titles and faced increasing competition in the mobile game industry.
• Sega Sammy could gain access to a well-known brand and a large user base in the global mobile gaming market through the acquisition.
• Some analysts and investors have expressed doubts about the synergy and valuation of the deal.
• The deal is expected to face scrutiny from regulators and shareholders of both companies before it can be finalized.

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The Japanese gaming giant Sega Sammy Holdings Inc, known for its iconic Sonic the Hedgehog franchise, has confirmed that it is in talks with Rovio Entertainment Oyj, the Finnish company behind the popular mobile game Angry Birds, over a possible acquisition. However, the deal is not finalized yet and there is no certainty that it will go through.

According to a report by The Wall Street Journal, Sega Sammy is close to buying Rovio for about $1 billion, which would be one of the biggest deals in the mobile gaming industry. Rovio has also issued a statement saying that it is discussing a potential tender offer with Sega Sammy, but that nothing has been decided yet.

Rovio, founded in 2003, rose to fame with its Angry Birds game, which was launched in 2009 and became a global phenomenon. The game has spawned several spin-offs, merchandise, movies, and a loyal fan base. Rovio claims that its games have been downloaded more than 5 billion times and that it has around 550 employees across eight studios worldwide.

However, Rovio has struggled to replicate the success of Angry Birds with other titles and has faced increasing competition from other mobile game developers. In February, Rovio announced that it had launched a strategic review of its business, including exploring various options such as mergers and acquisitions. Rovio was previously in talks with Playtika Holding Corp, an Israeli rival, for a takeover worth more than $800 million, but those negotiations ended last month without a deal.

Sega Sammy, on the other hand, is a global holding company formed by the merger of Sega and Sammy Corporation in 2004. Sega is one of the oldest and most influential video game companies in the world, with several multi-million-selling franchises such as Sonic the Hedgehog, Yakuza, and Persona. Sammy is a leading developer and seller of amusement arcade machines. Sega Sammy has a market value of about $3 billion and has been looking for ways to expand its presence in the mobile gaming market.

By acquiring Rovio, Sega Sammy could gain access to a well-known brand and a large user base in the global mobile gaming market, which is expected to grow to $272 billion by 2030, according to Newzoo. Sega Sammy could also leverage Rovio's expertise in creating casual games that appeal to a wide audience and generate recurring revenue from in-app purchases and advertising.

However, some analysts and investors have expressed doubts about the synergy and valuation of the deal. They have pointed out that Rovio's growth prospects are limited by its dependence on Angry Birds and its lack of innovation in recent years. They have also questioned whether Sega Sammy can integrate Rovio's culture and operations smoothly and whether it can justify paying such a high price for a company that had a market value of $707 million as of Friday (14th April).

The deal is expected to face scrutiny from regulators and shareholders of both companies before it can be finalized. Sega Sammy said that it will discuss the matter during a board meeting on Monday and will make an announcement if any formal decision is made. Rovio said that it will keep its shareholders and other stakeholders informed of any material developments regarding the possible tender offer.