Game on for Tencentbacked Paradox in M&A and mobile
STOCKHOLM/LONDON: Tencent-backed strategy and simulation games publisher Paradox Interactive expects more acquisitions and mobile gaming to help it meet sky-high investor expectations.
Shares in the maker of games such as Stellaris have risen almost 500 per cent since it listed two years ago, giving it a market value of nearly 21 billion crowns (US$2.3 billion).
Paradox is part of a thriving cluster of gaming companies to spring out of Sweden, including Microsoft-owned Minecraft maker Mojang and Candy Crush maker King, which was bought by Activision Blizzard.
Incoming chief executive Ebba Ljungerud, who takes over from Paradox’s main owner, Fredrik Wester, in August, told Reuters that game developers, publishers and studios were all potential targets, with the best growth opportunities in the sector in Asia and on mobile.
“Of course we are looking at them,” she said, adding that Paradox has a limited presence in both and that it was “digging where it stands” in terms of existing markets, of which the US is the most important.
Ljungerud expects at least 10 per cent of Paradox’s sales to be from mobile games by 2020, from next to nothing now. It has a fanbase of more than two million who play one of its games each month, and a registered user base in excess of seven million.
Paradox’s console- and PC-based games, such as ‘Europa Universalis’ and ‘Cities: Skylines’, often have an historical setting and are played on a world map.
Tencent has a five per cent stake in Paradox, one of a number of bets made in recent years by the world’s largest gaming company by revenue and the biggest investor in other gaming firms, which has shifted from taking big stakes in proven winners to spreading its cash among early-stage game design firms.
It holds majority or significant minority stakes in Clash of Clans creator Supercell of Finland, Epic Games, the makers of this year’s biggest global hit, Fortnite, and eSports league organizser Riot Games.
“Expectations are high, that is obvious,” said Swedbank portfolio manager Carl Armfelt, who has an 8.6 per cent holding in Paradox. “There’s the high valuation both on existing products and prospects they will make strategic deals.”
Paradox, whose revenues have quadrupled over four years to 814 million crowns in 2017, has bought US-based White Wolf Publishing, maker of the horror-themed World of Darkness game franchise, Netherland-based Triumph Studios and Battletech-maker Harebrained Schemes, another US games studio.
“Our cash is strong and we have a good valuation... so there is room (for acquisitions),” Ljungerud said.
Paradox’s competitors include Electronic Arts and Assassin’s Creed-maker Ubisoft, although Ljungerud said its was competing for people’s time rather than against other companies’ games.