AppLovin Values Game Maker Machine Zone At Around $500 million

(Bloomberg) -- Just four years ago, mobile game maker Machine Zone Inc. was a high-flying unicorn valued at $5 billion. On Thursday, it sold for about a tenth of that amount, according to people familiar with the matter.

AppLovin Corp paid about $500 million for the company, said the people, who asked not to be identified because the matter is private.

Machine Zone received cash and stock in the combined company, one of the people said.

Financial terms weren’t disclosed in the deal announcement Thursday.

A representative for AppLovin declined to comment, while a representative for Machine Zone didn’t respond to a request for comment.

Palo Alto, California-based Machine Zone made a commercial that played during the Super Bowl in 2015 starring model Kate Upton which helped move one of its mobile games Game of War up the top-grossing app charts.

Outsized valuations in Silicon Valley have crashed in recent years, with the high-profile flop of WeWork being a cautionary tale. The pandemic has also hurt the fortunes of well-funded startups such as Airbnb Inc and caused others to cut staff.

This has led some startups to seek tie-ups with other private companies. Last month, Foursquare Labs Inc. and Factual Inc., two privately held location data companies, agreed to merge. In March, the venture-backed marketplace startup OfferUp agreed to combine with the U.S. business of Letgo, in another private deal.

Machine Zone’s buyer, AppLovin, which publishes mobile games and also does marketing for them, is backed by private equity firm KKR & Co and has eyed an IPO for the past few years. It was last valued at $2 billion in 2018 when KKR invested, according to PitchBook.

Machine Zone has raised about $725 million in private funding since it was founded in 2008, according to PitchBook. Its last funding round in 2016 valued the company at $5 billion, PitchBook showed.

Machine Zone had been backed by Y Combinator Management LLC, Anthos Capital LP, Menlo Ventures Management LP and JPMorgan Chase & Co.

LionTree Advisors LLC and Fenwick & West LLP advised AppLovin. Houlihan Lokey Inc. advised Machine Zone, a bank spokesperson said.

©2020 Bloomberg L.P.