Just three years after acquiring Big Fish Games, Churchill Downs Inc. is selling its mobile gaming subsidiary to Australia-based Aristocrat Technologies for $990 million.
Churchill Downs announced on Wednesday that it will sell Seattle-based Big Fish to Aristocrat Technologies, a subsidiary of Aristocrat Leisure Limited, a publicly-traded gaming company that operates in 90 countries and employs more than 5,000 employees. The deal has been approved by the Churchill Downs board and is expected to close in the first quarter next year.
Churchill Downs is a publicly-traded company that operates the famous Churchill Downs horse racetrack in Louisville, home to the legendary Kentucky Derby. It also owns six casinos, a video poker business, an online wagering business, and a bevy of other holdings.
The company acquired Big Fish in 2014 for $885 million — so about $100 million less than what Aristocrat agreed to pay three years later.
“Big Fish is a very successful business with a bright future that will be best realized by being part of Aristocrat’s strategy and vision for their online and mobile gaming portfolio,” Churchill Downs CEO Bill Carstanjen said in a statement. “We thank our team members at Big Fish for their outstanding efforts over the three years since CDI acquired Big Fish. We will refocus our strategy on our core assets and capabilities including growing the Kentucky Derby, expanding the casino segment, TwinSpires.com and other forms of real money gaming, and maximizing our thoroughbred racing operations.”
Update: A spokesperson for Aristocrat says the company has no plans to move Big Fish out of Seattle, and does not plan any layoffs, saying that it will be “business as usual” at Big Fish after the transaction closes.
The company employs 700 people; more than 500 employees are based in Seattle, according to LinkedIn, where it will relocate from its current waterfront home to a larger new headquarters in downtown Seattle next year. There are 24 open positions on its career site.
In a press release, Aristocrat said Big Fish will continue to operate as a standalone business. In its investor presentation for the acquisition, the company noted that Big Fish reported $458 million in annual revenue for the 12 months ending Sept. 30, up $337 million in 2014 — annual profits were up from $57 million in 2014 to $83 million this year.
Big Fish also has 12.4 million monthly active users and 3.5 daily active users, up from 5.1 million and 1.1 million in 2014, respectively.
In its most recent earnings report on Nov. 1, Churchill Downs noted that revenue from Big Fish declined $4.4 million from last year, while adjusted earnings fell by $10.2 million.
Aristocrat said the deal will establish the company as the No. 2 social casino publisher globally. The global social gaming market is expected to reach $19 billion by 2022, up from $8 billion in 2016, according to Research and Markets.
“Big Fish’s digital-first social casino content and industry-leading meta-game capability and applications are highly complementary to Aristocrat’s existing and industry-leading land based digital content business,” Aristocrat CEO Trevor Croker said in a statement. “The acquisition of Big Fish will also materially expand our social gaming footprint, positioning Aristocrat to further capitalise on growth in mobile gaming following the acquisition of Plarium. Big Fish’s strength in casual and card games is highly complementary to Plarium’s strategy games portfolio.”
Big Fish was founded in 2002 by Paul Thelen, a former RealNetworks employee who holds an MBA from Stanford and an electrical engineering degree from the University of Washington.
The company raised $83 million from Balderton Capital in 2008, and it had been discussed for years as a possible IPO candidate.
By 2011, the privately-held company reported $180 million in revenue and had about 700 employees. Thelen resumed the CEO post in 2012, attempting to launch the company’s streaming gaming efforts. However, by 2013, Big Fish had pulled the plug on the cloud games business and announced a number of layoffs, including the closure of facilities in Ireland and Canada.
The company never produced a massive hit in the mobile or social gaming realm, passed by companies such as Zynga (with Farmville) and Rovio (with Angry Birds). Even so, Churchill Downs decided to pay $885 million for the company in 2014.
Big Fish, which has additional offices in Oakland and Luxembourg, currently offers more than 450 mobile games and 3,500 PC and Mac games. Big Fish Casino is one of the top grossing mobile casino games. The company describes itself as “the world’s largest producer and distributor of casual games.”
Aristocrat, meanwhile, does have some recent Seattle-area connections. This past September, it announced a partnership with Tulalip Tribe of Washington that will enable the company to bring its games in the state.
