Modern Times Group (MTG) has agreed to buy 100% of the US games publisher and developer Kongregate from its current owner GameStop for $55 million. The deal is subject to regulatory approval and completion of certain other conditions.
San Francisco based Kongregate was founded in 2006 and has 80 employees. It 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 by 38% in 2016 to $35 million, with mobile revenue generated from in game purchasing and advertising growing by 74%. It is expected to grow its revenues to at least $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.
MTG notes that the investment follows its recent acquisition of 51% of Hamburg based online games developer InnoGames in 2016 and 2017 and gives it a clear foothold in both the European and US markets.
Commenting on the acquisition, Jørgen Madsen Lindemann, MTG president and CEO, said: “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 $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, added: “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, contimued: “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.”