Zynga Inc is buying OMGPOP, maker of the popular video game Draw Something for about $200 million in its biggest acquisition to date as the company moves to expand its lineup of games on mobile devices and Facebook.
A source familiar with the matter told Reuters that Zynga bought the New York-based company for $200 million. The company declined to comment on the deal's financials or say whether it was accretive on a conference call on Wednesday.
Zynga, which raised $1 billion in an initial public offering last December, makes some of the most popular games on tablets and smart phones such as Words with Friends and Scramble with Friends. The $200 million deal is its largest to date and the second-biggest purchase since 2010 when it bought Newtoy Inc, the publisher of Words With Friends for $53.3 million.
OMGPOP makes the game Draw Something where players make digital sketches of items or pop culture figures such as Lady Gaga and then compete to guess what the drawings are. All 40 employees will join Zynga and the company's headquarters will remain in New York, according to a statement.
Hudson Square analyst Dan Ernst said Zynga could easily afford a deal worth $200 million because, since its IPO, it has a market capitalization of $11 billion and $2 billion of cash on its balance sheet.
But it is always a risk acquiring a company that has only produced one well-known game in recent months, he said.
The big risk is how long do they last? But it seems like a high quality team though and doesn't feel like a one-hit wonder, Ernst said.
In the six weeks since Draw Something has been the market, it has garnered more than 35 million downloads and risen to the top of the app charts on Apple and Android in 84 countries, according to Zynga.
Its popularity on mobile devices could be a boon to Zynga, which investors are watching closely to see if it can diversify outside of Facebook, where it makes 93 percent of its revenue. Zynga said in February that it ended last year with 15 million daily mobile users, a five-fold increase from a year earlier.
Zynga shares closed about 2.5 percent, or 33 cents higher, at $13.72 per share on Wednesday.
(Reporting by Sarah McBride in San Francisco and Liana B. Baker in New York; editing by Andre Grenon)