Churchill Downs to Buy Mobile Game Company

Churchill Downs announced plans to acquire Big Fish Games, a Seattle-based company that provides online game content, for up to $885 million.

Churchill Downs Inc., the Kentucky based company which owns the home of the Kentucky Derby, announced plans to acquire Big Fish Games, a 12-year-old Seattle-based mobile game company whose offerings include Big Fish Casino, for up to 5 million.

Big Fish’s top games include Fairway Solitaire, a card game; Gummy Drop, where players align three identical shapes in a row; and Big Fish Casino, a collection of classic gambling games in which players can buy virtual chips but cannot win real money.

Churchill Downs owns five racetracks, including Churchill itself, where the Kentucky Derby is run. It has half a dozen casinos from Florida to Maine. And it owns an online gambling business,

“The acquisition of Big Fish and our entry into the rapidly growing mobile and online games industry gives us new products, new customers, new geographies and new sizable growth opportunities,” William C. Carstanjen, CEO of Churchill Downs, said in a statement.

Paul Thelen, founder and chief executive of Big Fish, said Churchill Downs had a commitment to interactive entertainment and a strong track record of growth. “Churchill Downs is a great cultural fit for us, and we are thrilled to be joining the Churchill Downs family,” he said.

Like most mobile game companies, Big Fish offers free games that seek to coax players into paying for extras, like virtual items that speed up their progress. For instance, its casino game awards players free chips, but when they run out they either have to pay to receive new chips immediately or wait hours for the game to replenish them.

Big Fish said its 2013 revenue was $266 million. It was the company’s 11th consecutive year of double-digit revenue growth.

The deal is worth at least $485 million, with potential additional payments of up to $350 million, depending on Big Fish’s earnings for 2015, and a $50 million bonus to Thelen, based on the company’s 2016 bookings. Except for $15 million in Churchill Downs stock, the purchase price will be paid in cash.

Goldman Sachs was an adviser to Churchill Downs on the deal, while Qatalyst Partners advised Big Fish.