Supercell: SoftBank and GungHo acquire 51% for US$ 1.5 billion

softbank invests in supercell

Supercell valued at approx. US$ 3 billion

Supercell investment leverages paradigm shift, time shift and market disconnects

Smartphones and the “freemium” business models are bringing a dual paradigm shift to games and create a new truly global market. To take advantage of this global paradigm shift, its necessary to overcome the cultural disconnects between markets. SoftBank and GungHo‘s investment in the Finnish smartphone/tablet game maker Supercell, announced on Oct. 15, will help to overcome the disconnect between Japan’s and other game markets for both Supercell and GungHo.

The disconnect between Japan and other countries is often surprising – when BusinessWeek in 2006 commented on rumors that SoftBank might introduce an Apple “iPod-Phone” to Japan, BusinessWeek remarked that “Apple would normally never talk to a small-fry such as SoftBank” …. at that time SoftBank’s annual revenues were about twice Apple’s, and BusinessWeek printed my correction pointing out that SoftBank even at that time was anything but a “small fry”.

One of SoftBank‘s aspects is it’s “time-shift” investment model, another is SoftBank‘s 30/300 year vision – both are important factors to understand the Supercell investment.

Supercell investment: Comparing Supercell's US$ 3 billion valuation with Japanese game companies (note that the market cap for the full SONY Group is shown here)
Comparing Supercell’s US$ 3 billion valuation with Japanese game companies (note that the market cap for the full SONY Group is shown here)

This Figure contrasts the market caps of new mobile and smartphone centric game companies (GungHo, Supercell, DeNA and GREE) with traditional console, video game and arcade game companies.

SoftBank announced that because of the majority investment, Supercell will become a subsidiary of SoftBank, and GungHo will account for Supercell’s profit/loss under the equity method.

Supercell investment: Comparing Supercell with Japanese game companies and SoftBank
Comparing Supercell with Japanese game companies and SoftBank

GungHo and Supercell both are top-ranking mobile game companies: GungHo inside Japan with “Puzzle and Dragons”, and Supercell outside Japan with “Hay Day” and “Clash of Clans”. Expect both to leverage each other’s resources.

Both GungHo and Supercell show explosive growth:

GungHo’s operating profits increased 4050% (x 40) for Jan-June 2013 compared to the same period one year earlier.
Supercell’s revenues (mainly in-game purchases) jumped 500x from EURO 151,000 in 2011 to EURO 78 million in 2012.

Culture can be an issue between Japan and other countries, however, SoftBank has invested in more than 1000 comparable companies, and many of SoftBank’s investments have been outstandingly successful including Alibaba and Yahoo.

However, investment and management support by SoftBank does not automatically guarantee success in Japan – despite SoftBank’s investment and support, Zynga closed operations in Japan earlier this year. Success in Japan will remain Supercell’s responsibility, despite SoftBank’s and GungHo’s help and investment – as Zynga can tell.

Copyright (c) 2013-2015 Eurotechnology Japan KK All Rights Reserved

Otsuka buys Astex Pharmaceuticals (NASDAQ:ASTX) for US$ 886 million

Astex Pharmaceuticals is an oncology drug discovery company based on the Pyramid drug discovery platform in Cambridge (UK)

Otsuka buys Astex in a tender offer for US$ 886 million

Otsuka buys Astex Pharmaceuticals (formally Astex Therapeutics, UK). Astex Therapeutics is a oncology drug discovery company based in Cambridge, England, and at the time of acquisition was listed on NASDAQ (ASTX).

The acquisition was done through a tender offer at an offer price of US$ 8.50 per share, a 48% premium on the stock price, starting on 13 September 2013, and completed on 10 October 2013, followed by a merger on 11 October 2013.

Total acquisition capital was US$ 886 million.

Astex Therapeutics

Astex Therapeutics is a oncology drug discovery company, based on a proprietary fragment based “drug discovery platform” Pyramid.

Astex Therapeutics was founded in 1999 in Cambridge, England, by

On 7 April 2011, Astex was acquired by SuperGen (NASDAQ:SUPG). The surviving company was Astex (NASDAQ:ASTX). This acquisition closed on July 2011.

Astex business model based on up-front technology access fees, success fees for milestones and product royalties to fund internal R&D

Astex Therapeutics has developed a business model where revenues offset cash burn. Fee income provides funding for Astex R&D: Astex does not work on a fee-for-service basis, but achieves substantial upfront cash technology access fees, and agrees on success fees based on achieved development milestones, and royalties on product sales.

Examples of major agreements under this business model:

  • 6 December 2005: Novartis, upfront access fee and + deferred equity payments of US$ 25 million, potential of up to US$ 520 in fees. World-wide license for cell-cycle inhibitor AT9311, option to license cell cycle inhibitor AT7519
  • 2008: Janssen, US$ 37 million upfront access fee and equity and initial research funding
  • 2009: GSK, US$ 33 million upfront fee and equity

Otsuka Pharmaceutical Co., Ltd. (大塚製薬株式会社)

Otsuka Pharmaceutical Co., Ltd. (大塚製薬株式会社) is a Japanese pharmaceutical company, founded on 10 August 1964, traded on the Tokyo Stock Exchange (TYO:4578).

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