Casino slot maker International Game Technology (IGT) has acquired Double Down Interactive LLC—a privately-held developer of gaming software with applications on social media site Facebook—for US$500mm.
The deal for the Seattle, USA-based firm consists of US$250 million in cash, US$85 million in ‘retention payments’ and US$165 million ‘earnout’ (payments based on the business reaching a certain agreed earnings threshold)—the latter over the course of three years.
Double Down has the third most popular Facebook card game app—Double Down Casino (DDC)—according to Socialbakers.com, a social media statistics website. According to the site, DDC currently has 4.7 million monthly active users (MAU), making it the 50th leading Facebook app and third most popular card game app. DDC offers online play-for-fun slots, blackjack, and video poker.
“DDC earns revenue when players use purchased Facebook credits (Facebook takes a 30% fee) for virtual casino chips which cannot be redeemed for value. App leader Zynga (146 million MAU) converts 6.3% of their players to paying customers, but we estimate DDC converts closer to 2-4%,” said Wells Fargo Senior Analyst Cameron McKnight in a note to investors.
“We believe this acquisition gives IGT a well-known B2C brand which should grow in popularity with IGT’s deep library of game titles. While GSN Network [Game Show Network] has a Wheel of Fortune slot app, we believe IGT may be permitted to also develop a Wheel of Fortune game,” added Wells Fargo.
“IGT’s growth plan for the interactive business includes positioning the company in US markets and being an active participant in the process,” said Union Gaming Research in its note on the deal.
“In our opinion, the Double Down acquisition fits these criteria and will provide IGT with a B2C platform to further leverage its content, game mechanics and math models. Should the federal passage of online gaming fail in the next few years, we still believe IGT would benefit from the acquisition of an entity that is free cash flow positive and provides IGT with an entry into the growing online for-play wager market,” added Union Gaming.
