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Game developer Zynga attracts takeover interest from rivals


ZYNGA Inc, the firm that created FarmVille and Words With Friends, has attracted takeover interest from other game developers amid a jump in dealmaking in the industry, people familiar with the matter said.

The San Francisco-based company has received preliminary approaches, though no formal talks are taking place at the moment, the people said, asking not to be identified because the discussions are private.

Zynga climbed 12 per cent to close at US$4.36 in New York on Tuesday, the biggest jump since May 2017, giving the company a market value of about US$3.8 billion. Zynga first listed in 2011.

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A spokeswoman for the company declined to comment.

Zynga operates in the cut-throat world of mobile gaming, where companies often struggle to replicate the runaway success of their early hits. It increasingly competes with larger firms such as Paris-based Ubisoft Entertainment SA, maker of the Assassin's Creed games, as well as Activison Blizzard Inc, which bought Candy Crush developer King Digital Entertainment Plc in 2016.

Rovio Entertainment Oyj, which developed the highly successful game Angry Birds, has produced multiple spinoffs in the years since. Still, chief executive officer Kati Levoranta told investors on a call in August that its flagship game, Angry Birds 2, was overshadowing the performance of some of its other titles.

In August, Zynga scored a multi-year licensing deal with Walt Disney Co to develop and publish a mobile game based on the Star Wars film franchise. The company's shares jumped 7.8 per cent the day after the announcement, erasing the stock's losses for the year. More than one billion people have played games developed by the 11-year-old firm, according to its website.

Spending on companies that make entertainment software has more than doubled in the last 12 months, according to data compiled by Bloomberg. The biggest so far was slot machine maker Aristocrat Leisure Ltd's US$990 million bid for Big Fish Games.

The major games studios have been attempting to expand their mobile offerings in an increasingly competitive, but lucrative, market. Supercell Oy, the maker of mobile games Clash of Clans and Hay Day, posted revenue of just over US$2 billion in 2017, despite lacking a global launch of a new game.

Ubisoft's mobile business was profitable for the first time last fiscal year and accounted for 5 per cent of the group's full-year 2018 revenues. Yves Guillemot, CEO of Ubisoft, said in an earnings call in May that the company is intent on pushing more of its flagship PC games onto mobile.

In an Electronic Arts Inc earnings call in July, chief financial officer Blake Jorgensen said the company is looking at mobile firms for talent and business opportunities, rather than to buy a specific product. Although many of these opportunities are fairly small, "we want to make sure we keep enough dry powder in case something does change", he said. BLOOMBERG