Penn signs Rocket deal

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As one US casino giant has exited the social casino space, another has entered the arena after Penn National announced it had bought up San Francisco-based social casino games developer Rocket Games for $60m.

The all-cash deal came in the same week that Caesars Entertainment Corporation sold its Playtika social gaming unit for $4.4bn to a consortium of Chinse business interests.

Under the terms of the deal, Rocket management and founders are due an earnout that could see them collect a further $50m depending on whether the company hits its expected profit targets. Penn said the deal would be immediately earnings accretive.

Rocket Games has only been in existence since 2013 when it was founded by game developers Bill Gelpi (currently chief executive) and Steven Jian (chief technology officer). They were joined in 2014 by former Zynga high ups Niko Vuori and Justin Cooper.

Penn said that Rocket generated $5.6m of EBITDA in the first six months of this year. Among its hit games are Viva Slots Las Vegas and Downtown Deluxe Slots. In the press release, Penn cites the evidence of a recent study by Eilers & Krejcik, a US-based research firm, that suggested Rocket was the fastest-growing social casino operator in 2015, hitting a growth rate of 500% over the course of the year.

Penn National has gone through a transformation in the past three years after it separated its gaming assets from its real-estate assets in 2013, with the gaming company focusing on a range of growth and diversification strategies. As a part of that it launched its own social casino operation last year and it hopes the Rocket deal will driver further growth in that area.

Penn’s online operations are led by ex-Betfred online chief executive Chris Sheffield who said the deal enhances Penn’s own social casino capabilities. “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,” he said.

In comparison with the latest figures from Penn at the time of its second-quarter results at the end of July, which said its own social operations achieved active daily average players of circa 50,000, Rocket’s games attract over 200,000 average daily active players.

Gelpi from Rocket said his team was delighted to be teaming up with Penn. “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.”

The sale of Playtika in the same week highlighted the value of social gaming as a long-term play. Caesars bought a controlling stake in the Israeli-based business sin 2011 for a reported $80m. The money will go towards allaying the worries of the bondholders of Caesars, which is currently operating under Chapter 11 bankruptcy protection.