Acquires 100% Stake in Unknown Worlds for US$750mn
The author is an analyst of NH Investment & Securities. He can be reached at jaemin.ahn@nhqv.com. -- Ed.
- On Oct 29, Krafton announced that it had acquired a 100% stake in Unknown Worlds Entertainment for W878.8bn (US$750mn), including a US$250mn earnout payment depending on the achievement of performance milestones by 2026.
- We positively view Krafton’s acquisition of Unknown Worlds in that Krafton is to: 1) further enhance its development capabilities; 2) diversify game genres for targeting the global market; 3) expand its new title lineup; and 4) productively utilize IPO funds.
- Unknown Worlds is a game company located in San Francisco, with 1H21 sales of W37bn and NP of W28.1bn. The firm posted 2020 sales of W29.6bn and NP of W7.8bn, and 2019 sales of W25.9bn and NP of W14bn. Its earnings are to be reflected in Krafton’s consolidated results as early as 4Q21. Despite its relatively small scale of operations compared to that of Krafton, the new studio is to make meaningful contributions via genre diversification and an expanded global presence. Of note, the acquisition price was set at a P/E of only 15.6x (based on 1H21 NP), a level lower than the average valuations of game companies.
- Unknown Worlds’ main titles include Sub Nautica (open-world survival, action adventure) and Natural Selection (FPS). The company is preparing to release at least one title in 2022 and 2023, respectively.
- From this acquisition, Krafton has secured its sixth development studio following Bluehole, PUBG Studio, Rising Wings, Striking Distance, and Dream Motion, and is growing into a company that offers various genres and lineups in the global game market.