Rovio Entertainment (HEL: ROVIO), a Finnish game developer best known for its Angry Birds franchise, has confirmed acquisition interest from Sega Corporation (TYO: 6460), a Japanese gaming giant.

Rovio announced in a statement issued on Saturday that it had commenced acquisition talks with Sega. The talks are preliminary and non-binding, and there’s no certainty of a deal being finalized.

• Sega has not made a formal tender offer, but a Friday report from the Wall Street Journal said the Japanese gaming giant was offering about $1bn, a significant premium from Rovio’s current market value of 646 million euros ($717mn).

Rovio was founded two decades ago and is best known for developing Angry Birds, a hit mobile game that has generated hundreds of millions of dollars in revenue from in-game ads and purchases, merchandise deals, and animated movies. However, Rovio has struggled to find success outside the Angry Birds franchise, and revenue growth has been lackluster. The company reported 318 million euros ($353mn) in revenue in 2022, a slight bump from 297 million euros ($330mn) in 2017, the year it listed on the public markets.

In January, Playtika, an Israeli gaming company, placed a formal bid to acquire Rovio for $740mn, a 55% premium to the company’s market value at the time, but the talks ended in March.

Rovio has been an ideal acquisition target for a while. With little growth to show on the public markets, it presents an opportunity for a moneyed gaming firm to acquire one of the most popular gaming franchises for a relatively affordable price. Sega fits that role, as Angry Birds will augment its roster of mobile and console games; the Japanese firm is best known for its Sonic the Hedgehog franchise.

The gaming industry has witnessed a flurry of billion-dollar mergers & acquisitions lately. Earlier this month, Savvy Games Group, a gaming venture primarily backed by the government of Saudi Arabia, struck a deal to acquire American mobile games maker Scopely for $4.9bn. Last year, Take-Two Interactive acquired mobile games maker Zynga for $13bn. Also, tech giant Microsoft agreed to buy mobile games publisher Activision Blizzard for $69bn, but the deal has faced serious antitrust scrutiny, including a lawsuit from the U.S. Federal Trade Commission (FTC).

Update: Rovio has formally accepted a takeover offer from Sega Corporation. The Japanese gaming giant will pay 706 million euros ($775mn) in cash.

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