Zynga to acquire mobile game developer Peak for $1.8 billion

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Zynga to acquire mobile game developer Peak for $1.8 billion
Image: Zynga

June 1 – Mobile gaming giant Zynga announced plans to purchase “Toon Blast” and “Toy Blast” developer, Peak, for $1.8 billion. Zynga expects the transaction to close by the third quarter, regulatory approval permitting.

The “Farmville” creator also revised its annual financial guidance up by $40 million in response to its takeover of the Turkish startup.

Details of Zynga’s Peak Purchase

Zynga stated it would buy Peak with $900 million cash and $900 million in common stock. The San Francisco-based corporation noted Peak will retain its “unique creative culture and brand identity” post-merger. The firm also said adding the startup’s eight franchises to its portfolio will boost its daily active users by 60 percent.

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Bloomberg Intelligence predicts the “Words with Friends” developer’s latest tie-up will greatly benefit its bottom line. Analyst Matthew Kanterman estimates Peak will increase Zygna’s yearly gross income by 50 percent and will also improve its earnings per share.  Also, as the startup’s user base resides primarily outside the U.S., the deal will expand the “CityVille” owner’s global footprint.

By acquiring Peak and its 100-member team, Zynga is making its most expensive deal to date. The corporation set its previous purchasing record when it bought “Empire & Puzzles” maker Small Giants Games for $560 million in 2018. Nevertheless, the “Draw Something” creator will still have $600 million on its balance sheet once the buyout is complete.

Why Zynga Bought Peak Now

While the coronavirus pandemic has prompted downturns in several industries, it has served as a growth driver in the video games sector. Indeed, Microsoft, Sony, and Valve have seen record usage of online platforms during the COVID-19 crisis. In addition, newly homebound and bored workers and students have caused worldwide sell-outs of Nintendo’s Switch hybrid console.

Peak’s games had both proven popular and lucrative before the global crisis occurred.

TechCrunch notes the studio’s “Toon Blast” and “Toy Blast” command a combined audience of 12 million. Moreover, the two titles have ranked in among the Apple App Store’s highest-grossing games for the last two years. As such, Zynga felt confident enough in Peak’s prospects to spend nearly $2 billion on it during a worldwide recession. Also, the two companies had a pre-existing relationship; the American brand bought the Turkish startup’s card game business for $100 million in 2017.

Zynga has established itself as a leading mobile entertainment corporation by strategically buying the hottest emerging studios.

Founded in 2007, the company has completed 35 acquisitions to date, and its game library attracts 21 million daily active users. In 2011, the firm launched an initial public offering with a $7 billion valuation. Despite facing intense competition and setbacks like a massive data breach in 2019, the corporation has remained consistently popular.

Zynga’s decision to bring Peak’s talented developers and compelling properties into its fold is just the latest example of its ongoing strategy. As work-from-home is becoming the new normal, the company’s acquisition of a key distraction provider is a long-term masterstroke.

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