On Monday, IGT announced it had signed a definitive purchase agreement to sell its DoubleDown Interactive social gaming division to an affiliate of South Korean social gaming operator DoubleU Games.
IGT says it will receive $825m via the sale, equal to 10.5x DoubleDown’s 2016 adjusted earnings. The deal has already been approved by both companies’ brain trusts, leaving only regulatory approvals standing in the way of an expected closing sometime in Q2 2017.
IGT says the deal also establishes a “multi-year strategic partnership” between the two companies to “provide innovative player experiences” in the social casino market. The game development, distribution and services agreement will grant DoubleU access to IGT’s casino game library, for which IGT will receive ongoing royalty payments.
IGT raised eyebrows in January 2012 when it branched out of its land-based gaming machine comfort zone and acquired DoubleDown for around $500m. Initial reaction was highly skeptical, but the naysayers were proven wrong when the social gaming division quickly became a key contributor to IGT’s quarterly results.
On Monday, IGT CEO Marco Sala said that after “several years of strong, organic growth and increasingly attractive valuation levels, the time is right for us to maximize the value of this asset for our shareholders.” IGT plans to use the proceeds for general purposes, including paying down debt.
DoubleU CEO Ga-Ram Kim called the deal “a unique and value-accretive partnership” combining the best of both companies. Kim also expressed confidence about DoubleU Games’ future as “a global leader in social casino.”
The sale is the second major social casino transfer from west to east in the last eight months, following the $4.4b sale of Caesars Interactive Entertainment’s Playtika social gaming division to a Chinese consortium led by billionaire Jack Ma.