Join gaming leaders online at GamesBeat Summit Next this upcoming November 9-10. Learn more about what comes next.
Nexters, which is based in Cyprus and has development operations in Eastern European cities such as Moscow, has struck a deal to merge with Kismet Acquisition One, a SPAC formed to take a private company public. Nexters’ biggest game is Hero Wars RPG, a role-playing game with more than 36 million downloads on iOS and Android in 2020.
SPACs have become a popular way for fast-moving companies to go public without all the hassle of a traditional IPO. SPACs are set up by managers who raise money in a blind shell company, and the investors don’t know what they’re putting their money into.
We’re seeing a lot of similar transactions, such as the initial public offering of Playtika, the Israel-based company that recently had its own IPO and raised $1.9 billion at an $11 billion valuation. Huuuge also said it will raise $150 million in an IPO on the Polish stock exchange.
Three top investment pros open up about what it takes to get your video game funded.
Taking advantage of the hot market, Nexters will wind up with $150 million in cash after the SPAC deal closes in the second quarter. It will have the capability to borrow hundreds of millions so that it will have the option of growing organically or making strategic acquisitions said Ivan Tavrin, TMT entrepreneur and executive and the founder of Kismet Capital Group, in an interview with GamesBeat.
Nexters builds mobile, web, and social games. The company generated $318 million in net bookings and $120 million in free cash flow to equity in 2020. Based on the expected continued growth of Hero Wars and new mobile game titles launching in 2021, it projects net bookings to grow to $562 million in 2023, after platform fees.
Nexters founders Andrey Fadeev and Boris Gertsovsky and existing shareholders of Nexters (including Igor Bukhman and Dmitrii Bukhman of Playrix) will roll 92% of their holdings into the combined company and agree to a 12-month lock-up (where they won’t sell their shares for a year). Fadeev and Gertsovsky will continue to run the company.
“We are growing organically, and we want to continue growing organically,” Fadeev said in an interview with GamesBeat. “We are launching three more games this year, including one that is a casual game in the farming genre with adventures and expeditions. With this deal, we now have the currency to do deals.”
Kismet Capital Group (via an affiliate) will invest $50 million in additional capital to ensure alignment with founders, existing shareholders, and public investors. Kismet Capital Group is based on Cyprus, and it has offices in Moscow and London.
Kismet Acquisition One Corp. is the first SPAC formed in August, 2020, by Tavrin, who will serve on the board of Nexters after the deal is done. Nexters will be listed on Nasdaq under the ticker symbol GDEV in the second quarter.
Tavrin founded Media 1, one of the largest independent media companies in the country, and struck a joint-venture deal with Disney to air the Disney Channel in Russia. Tavrin also created Media One Holdings, which owns 35 TV stations and 55 radio stations in Russia. He was the CEO of MegaFon (the second largest mobile phone company in Russia), which raised $1.7 billion on the London Stock Exchange and Moscow exchange in 2012.
“The main purpose of this transaction is to do something for the employees and also create a currency for more transactions,” Tavrin said.
Based in Cyprus since 2017, Nexters was founded in 2010, and it really started to grow after launching Hero Wars in 2018. Hero Wars is a midcore game, with hardcore gameplay in short session cycles. It is played in more than 100 countries, and it has delivered 8.5 times monthly active user growth in the past two years. Nexters said it has six million monthly active users. In the past two years, the number of paying users also grew four times.
“The main strategy of the company was to go all mobile,” Fadeev said. “We saw that RPGs became a very big genre on mobile.”
The company is planning to launch three new titles in 2021 in casual genres. Nexters plans to expand in Asian markets soon, as it believes its RPGs will be popular there.
As of 2020, 35% of the company’s net bookings came from the United States, 23% from Europe, and 19% from Asia, Tavrin said. The growth is expected to continue from 2021 to 2023. EBITDA (earnings before interest, taxes, depreciation, and amortization) is expected to come in at $138 million for 2021 and increase to $201 million by 2023.
Nexters aims to become the leading consolidator in the gaming space in Russian speaking countries, Eastern Europe, and beyond. The company has a strategic partnership with the founders of Playrix, the second-largest mobile game developer in the world by revenue.
The enterprise value of $1.9 billion represents 13.8 times projected 2021 and 11.6 times projected 2022 EBITDA. The company has 425 employees. LionTree served as an advisor to Kismet on the deal.
GamesBeatGamesBeat's creed when covering the game industry is "where passion meets business." What does this mean? We want to tell you how the news matters to you -- not just as a decision-maker at a game studio, but also as a fan of games. Whether you read our articles, listen to our podcasts, or watch our videos, GamesBeat will help you learn about the industry and enjoy engaging with it. How will you do that? Membership includes access to:
- Newsletters, such as DeanBeat
- The wonderful, educational, and fun speakers at our events
- Networking opportunities
- Special members-only interviews, chats, and "open office" events with GamesBeat staff
- Chatting with community members, GamesBeat staff, and other guests in our Discord
- And maybe even a fun prize or two
- Introductions to like-minded parties