It is now official that at a cost of $250 million, Take-Take Two Interactive Software Inc (NASDAQ:TTWO) will be acquiring Social Pointer, a Spanish mobile developer. Reliable sources have it that the payment dictates the first payment of $175 million in cash while the balance should be in Take-Two stock. Strauss Zelnick, the CEO of Take-Two Interactive says that their mission is to push the publisher into the mobile free-to-play market.
But what is the key interest for Take-Two Interactive on Social Pointer?
In the recent past, there has been a wave of buyouts and mergers as companies try to tap expertise and innovation from each other. Speaking to MCV, and in what seems like an affirmation, Zelnick said, “I stand by the concerns I had about the space and what we love about
Social Point’s revenue has grown to 29% per year since 2013. In 2016, the company generated close to $90.8 million in revenue. The least that can be said is that Take-Two is perhaps seeking tap from Social Point’s operations. Nonetheless, the company has a lot to gain from diversification.
Social Point is a profitable business with greater gameplay depth
Social Point has a great track record of producing quality games. It has a higher conversion rate in its games compared to its competitors. Given its big tailwind, it is not likely that the mobile gamer will face any problem in its growth. Furthermore, it has aligned a strong pipeline of new games for the next two years.
This is a clear explanation of why Take-Two will cling on. Remember the mobile gaming market has been experiencing an explosion in advancement. In 2016, the market had a turnaround of over $40 billion in revenue. Developers of mobile games are also quickly adopting the Smartphone technology for their business models. Clearly, Take-Two is set to yield from growth and profits of its new mobile subsidiary.
Nonetheless, the developer remains a separate entity from Take-Two even after the closure of the deal. Meanwhile, Take-Two’s stock was trading at $58.89 a fall of $0.80 or 1.34%.