TA Associates, Summit Partners Agree to Buy Bigpoint on Online-Gaming Boom

TA Associates Inc. and Summit Partners LP agreed to buy a majority stake in Bigpoint GmbH, Europe’s second-largest online games company, betting on booming demand for games such as “Seafight” and “DarkOrbit.”

The two Boston-based private-equity firms agreed to pay GMT Communications Partners and Comcast Corp. (CMCSA)’s NBC Peacock Fund $350 million for a “slight majority” in Bigpoint, said Jonathan Meeks, a TA Associates managing director in London.

The acquisition is the second-largest online-games deal after Walt Disney Co. (DIS) acquired Playdom last year for $563.2 million. The market, dominated by games such as Zynga Inc.’s “FarmVille” on social networking site Facebook, will more than double to almost $15 billion by 2014, according to researcher In-Stat. Hamburg-based Bigpoint offers its games for free and generates revenue by selling virtual goods, such as better weapons, usually for less than $1 apiece.

“The Internet gaming companies break down all those barriers of having to go through retailers, of having to work with Microsoft or Sony, and allows you to go direct to the customer,” Meeks said in an interview. “Companies like Bigpoint are going to be the new leaders” that will in the long term challenge Electronic Arts Inc. (ERTS) and Activision Blizzard Inc. (ATVI), the largest makers of computer games, he said.

Photographer: Dirk Schmidt/Bigpoint GmbH via Bloomberg

Bigpoint GmbH founder and co-Chief Executive Officer Heiko Hubertz. Close

Bigpoint GmbH founder and co-Chief Executive Officer Heiko Hubertz.

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Photographer: Dirk Schmidt/Bigpoint GmbH via Bloomberg

Bigpoint GmbH founder and co-Chief Executive Officer Heiko Hubertz.

NBC and GMT together acquired 70 percent of Bigpoint in 2008 in a deal that valued the game-maker at 70 million euros ($102 million).

Capturing Value

“It’s definitely one of the better investments that we made,” Natalie Tydeman, a partner at GMT Communications in London, said in an interview. “We weren’t actively seeking buyers, but we had more and more expressions of interest, and it got to a level where it made sense to capture some of that value.” GMT will retain a “significant interest,” she said.

Bigpoint was the world’s fifth-largest maker of 2D games, and Europe’s second biggest, with estimated sales of $171 million in 2010, according to Arizona-based In-Stat analyst Vahid Dejwakh.

The deal values Bigpoint at more than $600 million, making it the second-largest of its kind after the Playdom transaction, according to founder and co-Chief Executive Officer Heiko Hubertz, who will keep his 30 percent stake.

Playfish, Playdom

The world’s largest maker of games played on the Internet is Zynga with estimated sales of $650 million last year, followed by South Korea’s NHN Corp. (035420) and Nexon Corp. Gameforge in Karlsruhe, Germany, is the world’s fourth-largest and Europe’s largest, Dejwakh wrote in a report published in November. Electronic Arts’s Playfish was ranked sixth and Playdom was ranked seventh.

NHN added 2.7 percent to 208,500 won at 3:04 p.m. in Seoul, paring the stock’s decline this year to 8.2 percent. Redwood City, California-based Electronic Arts has jumped 25 percent this year and climbed 0.6 percent to $20.54 yesterday in U.S. trading.

Bigpoint’s European roots could be part of why the valuation falls short compared with Playdom, Hubertz said in an interview at the company’s headquarters.

“For our company, they pay a European valuation,” he said. “American companies, based in Silicon Valley, have a much higher valuation from the outset, just because they are based in the U.S. and because that is their main market.”

Discovery Executive

Bigpoint can achieve a higher valuation that eventually leads to an initial public offering as the company becomes more visible in the U.S. with a San Francisco office, Hubertz said. The company is profitable, he said, declining to give figures.

“In the last years we always doubled our revenue,” Hubertz said. “If we can keep that for the next one or two years, maybe we can achieve a billion-dollar valuation quite early and go much earlier on the stock exchange.”

Earlier this month, Bigpoint hired former Discovery Communications Inc. (DISCA) executive Arthur Bastings as co-CEO to help steer its expansion.

The company wants to make acquisitions to bring its games to Apple Inc. (AAPL)’s iPad tablet and handsets using Google Inc. (GOOG)’s Android platform and has ambitions to become one of the top three online gaming companies. It can spend more than $10 million euros on individual acquisitions, Hubertz said in an interview in Munich last month.

Montgomery & Co. was financial adviser to Bigpoint, GMT and NBC on the deal, and London-based Weil, Gotshal & Manges LLP was the legal adviser. Noah Advisors and Kirkland & Ellis LLP acted for TA Associates and Summit Partners.

To contact the reporter on this story: Ragnhild Kjetland in Frankfurt at rkjetland@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong in Berlin at kwong11@bloomberg.net

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