Horseracing and casino operator Churchill Downs Inc. (CD() has acquired social and mobile gaming developers Big Fish Games in a deal that could be worth as much as $885m.
On Wednesday, CDI announced it would make an upfront payment of $485m with a potential earn-out payment of up to $350m based on Big Fish’s 2015 adjusted earnings. Big Fish CEO Paul Thelen would also be in line for a $50m payment based on 2016 bookings (in-app purchases of virtual goods). The upfront payment will be an all-cash affair except for $15m of CDI stock issued to Thelen.
The deal, which has been approved by both parties’ boards, values the Seattle-based Big Fish at around 15x its adjusted earnings of $57.3m in the 12 months ending Sept. 30. Big Fish ranked fourth among social casino operators in Eilers Research Q3 report on the social gaming industry, lagging only Caesars Interactive’s Playtika, IGT’s DoubleDown Interactive and Zynga. The deal follows last month’s $100m acquisition of Tel Avia-based Diwip by Imperus Technologies (formerly Isis Labs).
CDI CEO Bill Carstanjen said the acquisition would give his company “new products, new customers, new geographies and new sizeable growth opportunities.” Carstanjen said the most important elements of the acquisition were “the strong team and the processes and capabilities” Big Fish has built at its three development studios. Thelen logrolled back, saying the deal positioned Big Fish “to become an even greater force in the casual mid-core and social casino mobile and online games industry.”
The news comes just two weeks after CDI officially killed off its online bingo site Luckity.com after two years of disappointing returns. In a filing with the Securities Exchange Commission, CDI said Luckity “did not achieve the expected financial returns and was unlikely to significantly improve its results.” The company expected to book a $3.2m charge in Q4 as a result of the shutdown.
