Weekly News Digest #45

Supercell increased its stake in Space App Games to 100%

Finland-based gaming company Supercell has increased its stake in UK-based mobile games developer Space Ape Games from 75% to 100%. The deal is expected to close in Spring 2025.

Supercell has been the majority owner of Space Ape since 2017, progressively increasing its stake over the years:

— In May’17, Supercell acquired a 62% stake in Space Ape for $55.8m, valuing the company at $90m.

— In Jul’22, Supercell raised its stake to 75% for an additional $37m and extended a $50m credit line to Space Ape, bringing the total investment to $189m.

The initial acquisition occurred following the success of Space Ape’s TRANSFORMERS: Earth Wars and shortly before the release of Fastlane: Road to Revenge, a racing shoot-em-up launched in May 2017. The second deal coincided with the development of Chrome Valley Customs — a match-3 title that has since become Space Ape’s most successful game.

But why is Supercell making this final move for complete ownership now? After providing a brief overview of the companies at the time of the deal, we’ll delve into that question.

Space Ape and Supercell in 2024 

Founded in 2012 and based in London, Space Ape Games is a mobile gaming studio with over 100 team members. According to AppMagic, Space Ape has made over $280m of lifetime IAP Net Revenue. Considering the revenue from ads, this number should be much higher. The studio has notably impacted the mobile gaming market with successful titles like Beatstar and Chrome Valley Customs.

According to AppMagic, Beatstar was the top-grossing mobile rhythm game in Tier-1 Western countries for over two years. Meanwhile, Chrome Valley Customs introduced a unique car-renovating meta targeting a male audience, which is rare for the traditionally female-oriented match-3 genre. This innovative approach has influenced other developers to create male-focused match-3 games, with notable examples including Forza Customs and Truck Star.

Source: AppMagic

After Supercell’s acquisition, Space Ape collaborated closely with its parent company. For example, it contributed to Hay Day and developed Boom Beach Frontlines, a game based on Supercell’s Boom Beach IP. However, the game never left its soft launch phase and was shut down due to underperformance.

While we don’t know much about Space Ape’s relationships with its parent company, its ownership by one of the most influential studios influenced the company’s strategy and pipeline.

Speaking of influence, Supercell has it through its games and as an active game investor. According to our data, from 2020 to YTD, Supercell has participated in 17 funding rounds, in 10 of which they were the sole investors, with funding rounds totaling $177.1m and $97.1m, respectively. Below are some of the most significant deals in recent years:

— In May’22, Supercell invested $60m in UK-based mobile games developer Trailmix Games, known for Love & Pies;

— In Jul’22, it participated in a $41m round for Germany-based web3 games developer Klang Games;

— Most recently, in Nov’24, Supercell financed Spain-based games developer Penguin Armada for an undisclosed amount.

As part of this analysis, we’ve created a table of all Supercell-related deals for the period. To gain access to this exclusive data and support our work, consider joining us on Patreon.

Strategic Rationale 

Following the 100% acquisition, Supercell plans to transform Space Ape into a new Supercell office in London. Supercell has expanded beyond Helsinki, with offices in Shanghai, Seoul, and San Francisco. Strengthening its presence in one of the gaming industry’s key hubs makes strategic sense and justifies a complete acquisition, but there could be more to it.

First, while details of the original acquisition aren’t fully disclosed, it’s reasonable to assume there were options and long-term incentives in place. Given Space Ape’s strong track record, the founders likely hit their KPIs and were ready for this transition.

Second, Supercell needs new hits to sustain its momentum. While the company successfully leveraged LiveOps to bring Brawl Stars to impressive heights, other titles have faced a downturn. Most notably, their most recent release, Squad Busters, saw a 50% drop in revenue within the first month after launch and continues to struggle.

Source: AppMagic 

In Feb’24, Ilkka Paananen, CEO of Supercell, acknowledged in his yearly blog post the company’s struggle with launching new hits since 2018. Despite numerous attempts, many projects failed to progress beyond the soft launch phase. As a result, one of Supercell’s fundamental goals and ambitions is to break this “no-global-launch curse” and deliver successful new titles to the market. With Squad Busters not meeting expectations, the studio and its parent company, Tencent, are likely feeling pressure to make something big.

In this context, working even more closely with one of the few companies capable of launching innovative titles that consistently resonate with players is a logical move — and the timing couldn’t be better.

We thank MY.GAMES and Xsolla for supporting this digest.

MERGERS & ACQUISITIONS

US-based gaming holding Take-Two Interactive Software (NASDAQ: TTWO) has sold off US-based PC & Console games publisher Private Division to an undisclosed buyer for an undisclosed sum. The company is also seeking a buyer for its publishing label. According to Take-Two’s CEO, one reason for the sale is that Private Division’s titles do not align with the holding’s focus on larger-scale games. However, Take-Two has retained the No Rest for the Wicked rights and will continue supporting the title. Private Division, known as the indie games arm of Take-Two, developed and published titles such as Kerbal Space Program, The Outer Worlds, OlliOlli World, and Rollerdrome, and experienced layoffs in May’24.

Israel-based distributed computing company Incredibuild has acquired Germany-based tech company Garden for an undisclosed sum. This acquisition is part of Incredibuild’s strategy to create a unified product portfolio, as Garden’s software helps developers accelerate the development of cloud-native applications. With this acquisition, Incredibuild aims to enhance its capabilities to accelerate the DevOps lifecycle for game developers and software creators.

US-based gaming holding Atari (OTC: PONGF) has entered into an agreement to acquire the Transport Tycoon IP from Chris Sawyer. Atari plans to leverage the rights to develop the franchise further. This acquisition follows Atari’s recent purchase of rights to the RollerCoaster Tycoon brand in Apr’24 and its acquisition of Intellivision in May’24.

France-based PC & Console games developer Amplitude Studios has completed a management buyout from the European division of Japan-based gaming giant SEGA (TYO: 6460) for an undisclosed sum. This deal is part of SEGA’s European division restructuring, which follows the separation from Relic in Mar’24 and layoffs at Creative Assembly, including the cancellation of the Hyenas title. Sega originally acquired Amplitude Studios in Jul’16.

VENTURE FINANCING

UK-based multiplatform games developer Radical Forge has secured $3.36m (GBP 2.6m) in a funding round from Mercia Equity Finance via the NPIF II fund. The funds will support the company’s expansion, the development of new titles, and the upcoming release of Southfield, scheduled for early 2025. In Mar’24, the company experienced layoffs.

Canada-based VR games developer Squido Studio has raised $3m in a funding round led by Triptyq Capital, with participation from Grishin Robotics, FJ Labs, Hartmann Capital, Fairway Capital, Earthling VC, and the Canada Media Fund. The funds will accelerate the development of the company’s title, DigiGods, which is positioned as a VR platform where players can communicate and interact with each other. The company raised $1m in a funding round in Nov’23.

Japan-based web3 gaming platform Game Beast has secured $2m in a Seed funding round led by Tido Capital and T Labs, with participation from K300 Ventures, Notch Venture, Asva Capital, Aza Ventures, and Buzzbridge Capital. The funds were raised for undisclosed purposes. The company is developing five undisclosed titles for its platform and Destiny of Gods, which entered public testing in Sep’24.

EARNINGS REPORTS

We are excited to introduce a new section in our digest that will provide a concise table of the latest earnings reports from gaming companies.