Power of Three: Get ready for the Supercell-GungHo-Softbank Triforce to shake up gaming
Nation of millions, warchest of billions
As strategic investments go, you don't get anything better than the $1.5 billion Softbank and GungHo Online have paid for 51 percent of Supercell.
With around 100 employees, the Finnish developer is massively profitable. At the current run-rate, it will have annual sales of around $1 billion, of which more than 75 percent is pure profit.
On that basis, technically it doesn't need the investment - at least in terms of the cash. But there are two key reasons why the deal works.
Too big not to poke
Even though Supercell recently had a secondary share sell off so investors and management could exit some of their cash, it was still worth a lot of money.
At some stage investors want to remove the majority of their cash so they can take their bonuses and reinvest. And they're not known for their patience, especially when they have a hit of Supercell proportions on their hands.
Supercell's Hay Day
Hence if Supercell it hadn't come to a conclusion about its longterm future, there would have been rumours about IPO or perhaps even other big corporations considering whether they could buy it, or a part of it.
But given its flat, almost anti-corporate management structure, there was clearly no way Supercell could have considered an IPO.
Indeed, given the scale of the company's success, this structure was becoming something of an issue. Companies worth hundreds of millions can sit in the corporate background and do as they please. Companies worth billions of dollars cannot.
There's too much at stake for their investors and shareholders and those who want to be investors and shareholders.
Separated at birth
In that context, the Softbank and GungHo deal is CEO Illka Paananen's dream.
Although a much larger and more established company - GungHo Online has been on the Japanese stock exchange for years - its culture is very similar to Supercell.
Like Supercell's Clash of Clans and Hay Day, GungHo is the surprised publisher of its own massively profitable free-to-play game Puzzle & Dragons.
The two companies also combined their userbases earlier in the year to cross-promote each other games; something that boosted Supercell's success in the lucrative Japanese market it had previously ignored.
In this way, the GungHo part of the deal - it also put in 20 percent of the $1.5 billion total - provides Supercell with access to the Japanese market, both in terms of market intelligent and distribution muscle, but also more subtle aspects such as cultural nuances.
As for Softbank, it's already the majority shareholder in GungHo Online, spending $265 million to gain 58.5 percent of the shares back in March 2013.
Aside of these deals, the Japanese internet and telecomms outfit (which also owns 80 percent of US carrier Sprint) has a market capitalisation of $88 billion.
It's now also a major player in the fastest growing, most profitable part of the global games business.
Two bigs make a massive
As Paananen pointed out in the blog post in which he announced the deal, for Supercell this is the merely the end of the beginning. The rest is yet to come.
"At Supercell, one of our greatest aspirations is to become the first truly global games company, one that has a strong foothold in both the West and the East, including Japan, Korea and China," he said.
"We want to build a company that people all over the globe will look back in 30 years and talk about all the great games that we developed and the impact they had on people’s lives.
"The same way I personally feel about Nintendo, for example."
And given that GungHo's market capitalisation recently overtook the veteran Japanese games company, that's no slip of the pen.
As you were, just richer
But from a Supercell point of view, what's most important about the deal is that Softbank's financial strength provides it with the stability and firepower it needs to make big bets in the future.
Yet it keeps its independence (as much as owning only 49 percent of your company enables), continuing to be based and pay taxes in Finland.
Supercell's Clash of Clans
And as Paananen also points out, Softbank's founder Masayoshi Son is a man whose business vision scales beyond the usual 5-year-plan to 300 years.
In a world moving as fast as the mobile gaming space, that remains an ambition beyond any single organisation to deliver but it's clear that for the next couple of years at least, there's a new centre of gaming power in the world.
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