Giant Network and a Chinese Consortium Buy Caesars Interactive for $4.4 Billion

The Shanghai-based Giant Network Technology Co. and Alibaba’s Jack Ma are part of a consortium which is buying 100% interest in Caesars Interactive for $4.4 billion.

The deal involves Caesars Casino and Playtika, though it does not involve the other famous brand in the CI portfolio: World Series of Poker. Caesars Entertainment maintains the brand associated with the most famous poker tournament in the world.

Still, Caesars Interactive includes the online gambling portals in New Jersey, Delaware, and Nevada. In all, the interactive division owns 11 gaming websites, including Slotomania, HarrasCasino.com, Caesars Bingo, Caesars Casino United Kingdom, and 888 Casino New Jersey. Most of its sites are powered by 888 software, though some use IGT Interactice, WMS Gaming, NetEnt, and Bally Technologies support.

Playtika’s Value

Playtika is an free social games branch of Caesars Interactive which was founded in 2010. The division is headquartered in Herzliya, Israel in the Tel Aviv District. Playtika is known for such games as Slotomania and Bingo Blitz. Giant Network already has said the virtual currency on their Playtika games will remain unconvertable to real currency.

Caesars Entertainment spent an estimated $100 million to buy Playtika in 2011. That investment proved to be visionary, as Playtika generated $725 million in revenues in 2015 and $456 million in the first half of 2016 alone.

Slotomania’s Value

Slotomania is the 7th-highest grossing game on Apple’s US App Store. Slotomania is a free-to-play game which generates revenues from discretionary in-game transactions.

Those familiar with Chinese business see an impressive consortium of investors, which includes over a dozen companies. Giant Investment’s Giant Interactive, Yunfeng Capital (co-founded by Alibaba), China Oceanwide Holdings, China Minsheng Trust, Hony Capital Fund, and CDH China HF Holdings Company all are part of the deal. The Caesars deal follows a series of major acquisitions in the mobile gaming field.

A Pattern of Mergers and Acquisitions

Tencent Holdings and its partners bough Supercell Oy, created of the Clash of Clans, for a massive $8.6 billion in July 2016. The French entertainment company, Vivendi SA, bought 61.7% of Gameloft’s capital in May 2016. It still controls 55.6% of the votes after it launched a tender offer for its shares of the company. Meanwhile, Activision Blizzard purchased King Digitial Entertain for $5.9 billion in February. King Digital is the creator of Candy Crush Saga.

In the first seven months of 2016, the mergers and acquisitions for the video game industry has reached $25 billion, according to Digi-Capital Inc. Casino-style mobile games are expected to reach a record $1.43 billin in global revenue this year. That is roughly 3.9% of all mobile game revenues across all genres. Revenues for all mobile games this year are expected to reach $36.42 billion, according to SuperData Research.

Entry into the Chinese Market

Robert Antokol, the CEO of Playtika, said the transaction is certain to mean good things for the future of his company. Mr. Antokol said the purchase means Playtika will be able to enter “large and rapidly growing emerging markets” — which mainly means China.

The Chinese video game market is a huge untapped source of revenue. Caesars Interactive likely would not have been able to enter the Chinese gaming market, so Caesars Interactive naturally is worth more to Giant Network Technology and its consortium. Thus, Caesars was able to sell their interactive division at a premium.

CEOC Bankruptcy Fight

Caesars Entertainment is currently involved in a bitter and complicated bankruptcy and reorganization battle involving one of its divisions. The Caesars Entertainment Operations Company (CEOC) is in the middle of an $18 billion bankruptcy. Its plan for reorganization is being challenged by 20% of the creditors, who believe they are being left holding a debt of about $9 billion, with few assets to show for them.

The selling off of Caesars Interactive should give the parent company the money to buy debt or otherwise fund operations. Thus, the deal should keep Caesars Entertainment from itself declaring bankruptcy in the meantime.