Rovio and Playtika Abort Merger Negotiations for Angry Birds Creator

Today, the mobile gaming company Playtika (NASDAQ:PLTK) and producer of the popular Angry Birds game, Rovio Entertainment, announced that they have discontinued their ongoing preliminary merger talks.

In January, Playtika had made an all-cash offer for the Finnish company, valuing it at $9.58 per share, which represented a 55% premium to Rovio’s stock closing price before the offer was made public. This followed an offer of $9.18 per share in November.

On February 6, Rovio revealed that their Board of Directors had decided to commence a strategic review and that they had entered into preliminary non-binding discussions with potential partners, including Playtika Holding Corp. However, these talks have now been terminated without any explanation being provided as to why.

Playtika, formerly a unit of Caesars Entertainment, is one of the leading providers of free-to-play social games on social networks and mobile devices, with more than 35 million monthly users. Popular titles include Bingo Blitz, Caesars Slots, Slotomania, and the World Series of Poker (WSOP) Social.

The acquisition of the iconic Angry Birds franchise likely attracted Playtika, as content is crucial in this sector and consumer preferences are constantly changing. Since its release in 2009, Angry Birds has achieved 500 billion app downloads in 2011, followed by 1 billion the next year, making it one of the most successful mobile game and entertainment brands of all time. Certain versions of the game feature in-app purchases, which are a crucial part of the revenue model for some mobile game developers.

Investors have reacted negatively to the news, as Playtika’s stock has dropped by more than 4% on above-average volume. Despite this, the shares are up 23.27% year-to-date. This is the second failed transaction involving Playtika, the first being when Joffre Capital announced it was abandoning plans to acquire a controlling stake in the gaming company due to internal issues and problems with the seller of the shares (PHUK II).