Pennsylvania-based Penn National Gaming Inc. (NASDAQ: PENN), a leading operator of casinos and racetracks, said it acquired San Francisco-based startup Rocket Games Inc., a developer of social casino games, for $60 million in cash, and up to $110 million in earn-out payments over the next two years, based on a multiple of 6.25 times Rocket’s then-trailing twelve month EBITDA.
Rocket was founded in 2013 by game developers Bill Gelpi (CEO) and Steven Jian (CTO). The startup’s management team was rounded out in 2014 by fellow Zynga veterans Niko Vuori (COO) and Justin Cooper (chief content officer). Rocket operates a portfolio of over 50 slots titles, with more than 800,000 daily active players, and has a team of over 30 employees.
Rocket was recognized by industry experts Eilers & Krejcik Gaming as the fastest growing social casino company in 2015, growing by over 500% and reaching a top-15 position globally. Rocket generated nearly $5.6 million of operating EBITDA during the six month period ended June 30, 2016.
Rocket’s library of over 50 social casino games feature hits such as Viva Slots Las Vegas, Downtown Deluxe Slots, Triple Double Slots and Vegas Jackpot Casino, along with popular licensed titles such as Popeye Classic Slots. Rocket’s social slot games are available on the iTunes App Store, the Google Play store, on Amazon and via Facebook.
Following the transaction Rocket will continue to be headquartered in San Francisco and its existing management team will continue to run day-to-day operations.
The deal comes just a few days after a Chinese consortium led by Shanghai Giant Network Technology Co. Ltd. (SHE: 2558), one of China’s largest online gaming companies, agreed to acquire the Israeli Playtika gaming subsidiary of Caesars Interactive Entertainment Inc., a unit of Caesars Entertainment Corp. (NASDAQ: CZR), for $4.4 billion.
“Penn National’s accretive acquisition of Rocket highlights our ongoing strategic initiative to acquire emerging growth platforms that complement, and allow us to leverage, our core regional gaming operations and database of over three million active customers,” said Penn National president and CEO, Timothy J. Wilmott. “Since the separation of our gaming assets from our real estate assets in 2013 we have been highly focused on a broad range of growth and diversification initiatives.”
In November 2013, Penn National spun off a number of properties into a new real estate investment trust (REIT) called Gaming and Leisure Properties Inc. (NASDAQ: GLPI), which currently owns 35 casino properties.
“Rocket’s growth and industry and consumer acclaim over the past 12 months is impressive given their lack of funding from outside investors or access to the resources and experience of an established casino operator,” said Chris Sheffield, managing director of iGaming at Penn National.
“Social and online gaming is an extremely attractive segment of mobile and online gaming, and tying our innovative gaming expertise to a traditional casino operator with a qualified database of customers will create unmatched opportunities for both Rocket Games and Penn National,” said rocket CEO Bill Gelpi.
The transaction is expected to be immediately accretive to Penn National’s operating results.
Penn National Gaming (formerly PNRC Corp.) owns, operates or has ownership interests in gaming and racing facilities and video gaming terminal operations with a focus on slot machine entertainment. At June 30, 2016, the company operated twenty-seven facilities in seventeen jurisdictions, including Florida, Illinois, Indiana, Kansas, Maine, Massachusetts, Maryland, Mississippi, Missouri, Nevada, New Jersey, New Mexico, Ohio, Pennsylvania, Texas, West Virginia, and Ontario. At June 30, 2016, in aggregate, Penn National operated approximately 33,400 gaming machines, 800 table games and 4,600 hotel rooms. The company has a market capitalization of $1.19 billion.
Penn Interactive Ventures (PIV) is the interactive division of Penn National operating out the company’s offices in Conshohocken, a suburb of Philadelphia. The business markets and supports a portfolio of innovative iGaming products including www.hollywoodcasino.com (online and mobile free slot games provided by Scientific Games), HollywoodSlots.com (Mobile and Facebook social free casino apps developed by OpenWager) and Hollywoodraces.com (an advance deposit wagering platform provided by Sportech PLC).
The company traces its roots to Penn National Race Course, which opened in 1972 in the Harrisburg suburb of Grantville, Pennsylvania.
In 2003, the company bought Hollywood Casino Corp. for $328 million plus $360 million in assumed debt, gaining casinos in Aurora, Illinois; Tunica, Mississippi; and Shreveport, Louisiana.
In 2005, Penn National acquired Argosy Gaming Company for $2.2 billion making it at the time the third largest publicly held gaming company in the country, after MGM Mirage and Harrah’s Entertainment.
In 2007, the company acquired the Zia Park Casino, Hotel & Racetrack in Hobbs, New Mexico for $200 million.
In 2012, Penn National acquired Harrah’s St. Louis casino from Caesars Entertainment Corp. (NASDAQ: CZR) for $610 million.
In February 2013, Penn National agreed to sell the Bullwhackers Casino in Black Hawk to an investor group led by casino developer John Zimpel.
In August 2015, Penn National acquired the iconic Tropicana Las Vegas for $360 million.