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Penn Nat’l pays up to $170M for Rocket Games, a social casino studio from Zynga alums

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While social games company Zynga’s push into real-money gambling may have had some hiccups, a group of alums who built a startup dedicated specifically to the genre have sold their company for up to $170 million. Rocket Games, a social gambling company based out of San Francisco, has been acquired by Penn National Gaming, the slot machine, video gaming machine, and casino company. Penn National says that it will pay $60 million in cash, as well as earn-outs of up to $110 million on top of that based on company performance.

Rocket Games said that in 2015 it grew 500 percent and is in the top 15 of all social casino gaming companies. It made $5.6 million of operating EBITDA during the six month period ended June 30, 2016, the company says.

For Penn, this is a way for the company to continue to expand the kinds of games that it offers in physical locations, as well as to extend its brand and customer relationships further into the online world, for those times when people are not visiting those physical venues.

“Penn National’s accretive acquisition of Rocket highlights our ongoing strategic initiative to acquire emerging growth platforms that complement, and allow us to leverage, our core regional gaming operations and database of over three million active customers,” said Penn National Gaming President and CEO, Timothy J. Wilmott, in a statement. “Since the separation of our gaming assets from our real estate assets in 2013 we have been highly focused on a broad range of growth and diversification initiatives.”

The company had also launched its own online presence,  Hollywoodcasino.com and Hollywoodslots.com, which it says are already profitable. “Based on our internal analysis, a significant segment of Penn National’s database customers actively participate in social and online gaming, and we believe there are meaningful operating and revenue synergies between Penn National’s operations, our Hollywoodcasino.com and Hollywoodslots.com social casino offerings and Rocket’s operations that will drive near- and long-term growth for our shareholders,” he noted.

What he didn’t add is also that moving further into new waves of business like this could be the boost the company needs right now. Penn National in its most recent financial reports posted net revenues of $769.4 million fro the three months that ended June 30, but that this fell short of their own guidance of $786.8 million.

Rocket Games makes apps for Android, iOS, Amazon and Facebook, and today has some 50 games in its portfolio, with the most popular including Viva Slots Vegas, Downtown Deluxe Slots, Triple Double Slots and Vegas Jackpot Casino. Like Zynga, it also licenses brands to develop gaming titles, including Popeye Classic Slots.

It is not clear how much Rocket Games, which was founded in 2013, had raised in private funding.

Its founders, executives and 30 other employees included some of Zynga’s most senior former staff, who left the latter company in the numerous waves of departures that hit around 2012-2014. Of the three co-founders, Bill Gelpi (Rocket Games’ CEO) had been Zynga’s director of product; Steven Jian (Rocket’s CTO) had been Zynga’s principal software engineer; and Niko Vuori (Rocket’s COO) was Zynga’s Studio GM among other roles. Other execs include Justin Cooper (Chief Content Officer, Rocket), who had been Zynga’s user experience VP. This team is coming to Penn with the acquisition.

“The entire Rocket team is delighted to join the Penn National family and leverage their expertise and nationwide reach to take our game development capabilities and company growth to the next level,” Gelpi said in a statement. “Social and online gaming is an extremely attractive segment of mobile and online gaming, and tying our innovative gaming expertise to a traditional casino operator with a qualified database of customers will create unmatched opportunities for both Rocket Games and Penn National.”

The exodus of talent from Zynga has fed into a number of other ventures, including a company acquired by Survey Monkey called Renzu, VR gaming company Playful, and mobile email company WeMail.

DLA Piper said that it provided legal counsel to Penn National Gaming around the deal.