In morning trade the Aristocrat Leisure Limited (ASX: ALL) share price has been amongst the best performers on the local market.
At the time of writing the gaming solutions company's shares are up 5% to $21.86.
What happened?
This morning Aristocrat announced the strategic acquisition of social gaming company Plarium for an upfront amount of US$500 million in cash.
Furthermore, the binding agreement includes an earn-out arrangement payable to Plarium shareholders following the end of calendar years 2017 and 2018 respectively, based on 10x trailing EBITDA at year end.
The acquisition is expected to be accretive to earnings in year one.
What is Plarium?
Plarium is a privately owned free-to-play mobile, social, and web-based game developer from Israel.
The company has nine key titles that are currently being monetised and a strong pipeline of future releases across multiple genres.
The company's most popular game, Vikings: War of Clans, has been one of the highest grossing strategy games in key markets across the world since its launch.
What now?
According to today's release, management has calculated that the acquisition would boost the revenue contribution of its Digital segment from 14% to 22%.
This is great news in my opinion because although I believe that conditions are favourable for its traditional slot machines business, I see its digital segment as being the key driver of growth in the future,
Another bonus in my opinion is that Plarium's existing management team have agreed to remain in their current positions until at least 2020. I believe this team and the talent it has attracted has played a key role in the company's success. Keeping them on board is a big win in my eyes.
Should you invest?
I continue to believe that Aristocrat Leisure is a great buy and hold investment option even after today's sizeable gain.
In light of this, I would choose it ahead of its cheaper but lower quality rival Ainsworth Game Technology Limited (ASX: AGI).
