MTG is acquiring 100% of U.S. games publisher and developer Kongregate Inc. from current owner GameStop Corp. for an Enterprise Value of USD 55 million. The transaction is subject to regulatory approval and completion of certain other closing conditions.
San Francisco based Kongregate was founded in 2006 and has 80 employees. Kongregate started as a browser based web gaming platform and has since expanded into publishing for both mobile and Steam games, and now into first party game development following the acquisition of San Diego based games studio Ultrabit.
The company grew its net sales (net of revenue share with developers) by 38% in 2016 to USD 35 million, with mobile revenue generated from in game purchasing and advertising growing by 74%. The company is expected to grow its revenues to at least USD 50 million in 2017, with an EBITDA margin of approximately 10%.
As a publisher, Kongregate has revenue sharing agreements with games developers. MTG and Kongregate intend to acquire further first party games developers, which will benefit from Kongregate’s global audience network, traffic generation capabilities, and publisher / platform relationships. This further expansion is expected to drive both continued growth and higher profitability levels.
The investment follows MTG’s recent acquisition of 51% of Hamburg based online games developer InnoGames in 2016 and 2017, and gives MTG a clear foothold in both the European and US markets.
Kongregate works closely with independent game developers all over the world, publishing games across multiple platforms and attracting up to 14 million monthly active users. Its web gaming portal features over 100,000 free-to-play games that are played by millions of gamers each month, while it has also published 45 mobile games that have been downloaded over 100 million times. Kongregate’s publishing services include consulting, analytics, marketing/user acquisition, launch support and ad management.
Kongregate has published award winning mobile games including:
Kongregate has also recently expanded into Steam publishing with ‘Animation Throwdown: The Quest for Cards’, ‘Spellstone’ and Steam-first title, ‘GRIDD: Retroenhanced’.
Kongregate also started its first party publishing programme with the recent acquisition of San Diego based Ultrabit. Ultrabit has developed the hit titles ‘Raid Brigade’, ‘Pocket Politics’ and, most recently, ‘Office Space: Idle Profits’ based on the cult-classic movie IP.
Jørgen Madsen Lindemann, MTG President and CEO: “This investment is in line with our strategy to invest in relevant, complementary and scalable digital content and communities. Online gaming is one of our three digital entertainment verticals, and we are establishing a presence in a gaming industry expected to be worth some USD 130 billion in 2020, of which mobile gaming is the fastest growing segment. Almost a third of the time people spend on mobile devices each day is spent gaming. We look forward to welcoming the high quality, hugely talented and well proven Kongregate team to MTG.”
Emily Greer, co-Founder and CEO of Kongregate: “Our vision has always been to nurture the development of indie game developers and the consumer gaming community. Our values are all about integrity, collaboration, and most of all, fun. MTG is not only a great partner as we continue to step up our expansion into new gaming platforms and channels, but the right partner because they share our values and commitment to empowering indie development teams to create unique and innovative gaming experiences for consumers across any and all game platforms.”
Arnd Benninghoff, MTG EVP and MTGx CEO: “MTG’s ambition is to create a next-generation publisher hub and acquiring Kongregate is the next step in this journey. They have a multi-platform business and a global audience network, and are now developing and acquiring their own high value game studio IP. This will enable us to screen a wide range of gaming companies at an early stage, in order to find additional investment opportunities.”
MTG’s Q2 financial results to be published on 18 July will include approximately SEK 10 million of transaction related costs within the MTGx business segment.
MTG’s financial advisor on this transaction is EY Corporate Finance.
NOTES TO EDITORS
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