Rovio: Announces a strategic review and preliminary non-binding discussions with certain parties in relation to a potential tender offer - Nordea

This morning Rovio announced that its Board of Directors has decided to commence strategic review following expressions of interest and indicative non-binding proposals to acquire Rovio. The Board has decided to enter into preliminary non-binding discussions with certain parties, including Playtika (who offered EUR 9.05 per share on 19 January), in relation to a potential tender offer for Rovio’s shares. In our view, this confirms that the Board is open for an acquisition and based on the release we can now assign a higher probability for competing bids. We believe that Rovio is likely to appear as an attractive asset for many due to its strong IP and as companies could look to M&A as means of user acquisition after Apple’s privacy changes. Potentially interested parties aside from Playtika could include, but not be limited to EA, Take-Two, Netflix or Disney, we believe. We still argue that a sale to Playtika is unlikely to be accepted given Playtika’s questionable reputation as a buyer and its historical cultural clashes with its prior Finnish acquisitions (Seriously, Reworks). We still consider Playtika’s offer price of EUR 9.05 as fairly attractive for investors with a shorter time horizon. The implied EV/EBITDA multiple corresponds to 9.9x on our 2023 estimates, which compares to western mobile gaming peers currently trading at a median of 5.5x and the sector five-year average NTM multiple of 9.7x. In 2018-19, the sector traded at an average NTM multiple of 9.3x. However, we note that M&A deal multiples have historically climbed up to ~20-25x EV/EBITDA for example on Take-Two’s acquisition of Zynga in 2022 and on EA’s acquisition of Glu Mobile in 2021.