WeMade buys $100 mn stake in social casino game developer

WeMade Co., a pioneer in South Korea's play-to-earn (P2E) game industry, has agreed to buy a controlling stake in smaller rival SundayToz Corp., better known for its mobile game Anipang series, for 136.7 billion won ($115 million).

The producer of Mir4, a popular free-to-play massively multiplayer online role-playing game (MMORPG), will become the largest shareholder in SundayToz with a 34% stake, according to the two companies' regulatory filings on Monday.

Additionally, SundayToz will raise 30 billion won by selling new bonds with warrants to WeMade.

The stake purchase, set to be completed next month, is aimed at diversifying WeMade's blockchain-based game portfolio. The company also plans to advance into the social casino game market, into which its bigger rival Netmarble Corp. made its foray through a $2.2 billion cross-border acquisition in August of this year. 

"In order to expand the ecosystem of our blockchain platform WEMIX, we will continue to carry out unprecedentedly aggressive and global M&A strategy," WeMade Chief Executive Henry Chang was quoted as saying by the company.

WeMade Co. plans to develop some 100 games using the blockchain gaming platform in 2022.

WEMIX also will be used as a blockchain platform for smaller online game developers in the country, namely; AN GAMES Co., Ltd, LightCON, Softon Entertainment, ACTION SQUARE CO., LTD., UTPlus Interactive Inc., and SUPERCAT. 

WeMade became the first South Korean developer to apply the P2E gaming model. Buoyed by the success of the overseas version of Mir4, its share price has skyrocketed by more than 10 times in almost two years, becoming a "ten-bagger stock."

With a market capitalization of 5.7 trillion won, the sixth-biggest stock on the Kosdaq plans to introduce SundayToz's casual, or mass-market games, on its blockchain platform.

The stake deal will also help WeMade expand into the non-fungible token (NFT)-based market.

SundayToz's subsidiary Play Links recently announced a plan to develop NFT-based social casino games to target global markets. Social casino games allow users to play slot machines, baccaras, blackjacks and pokers online or on mobile with cryptocurrencies.

ACQUISITION PREMIUM

WeMade is buying the stake from SundayToz's top shareholder Smilegate Holdings Inc. and through a rights offering of 52.7 billion.

Smilegate is the parent company of another South Korean game developer Smilegate Entertainment. Before the transaction, it was the top shareholder with a 35.52% stake in the developer of Slot Mate and Electric Slot.

WeMade will pay 42,000 won per share of SundayToz, or a 24% premium to the latter's closing price last Friday and slightly higher than its 52-week high of 40,900 won.

Back in 2014, Smilegate acquired shares for 18,100 won apiece in SundayToz, which currently has a market capitalization of 357 billion won, less than one-fifteenth of WeMade's.

Following the stake sale, Smilegate will turn its focus back to its hit MMORPG game series and first-person shooter video games.  

Since Smilegate took control of SundayToz, the revenue of the Anipang developer had halved to 72.7 billion won in 2017, compared with 144 billion won in 2014.

Last year, its revenue climbed to 106.2 billion won, but its operation profit tumbled to 13 billion won in 2020, versus 60.9 billion won in 2014. Most of SundayToz's founding members left the company in 2018.

Write to Ju-wan Kim at kjwan@hankyung.com
Yeonhee Kim edited this article.