Habbo makers Sulake acquired by Finnish telecom firm Elisa after child sex scandal and CEO switch

Finnish telecom and ICT company Elisa has acquired Sulake, the company behind the youth-oriented community site / social game Habbo Hotel.

The news was first reported on ArcticStartup.

Elisa, which serves approximately 2.2 million consumers in Finland, was already a significant shareholder of Sulake.

The deal sees the telecom and ICT firm increase its stake in Sulake from 24 percent to 85 percent at first, and Elisa says it will purchase the remaining shares this month.

Sulake in a statement says it will continue as an independent company and serve its customers under the Habbo brand. Elisa, in turn, says the acquisition will have zero effect on its future outlook or mid-term financial targets. Financial terms of the deal were not disclosed.

Sulake’s flagship service, Habbo Hotel, was caught up in a major child sex scandal last year after Channel 4 broadcasted an exposé on the presence of sexually explicit material on the social network for children.

One investor, VC firm Balderton Capital, split up with Sulake, effectively returning the 13 percent stake it held in the company in exchange for nada. Another one of its financial backers, 3i, remained committed to Sulake at first but also withdrew later on.

Sulake decided to ‘mute’ its entire site in the wake of the scandal as it worked to implement measures to prevent inappropriate actions and content in the future.

The company subsequently set up a ‘Parental Advisory Summit’ and slowly re-opened in many countries afterwards, but its brand was tarnished and layoffs quickly followed.

Then, at the beginning of this year, Paul LaFontaine stepped down as CEO after less than 1.5 years on the job, to go on and become Managing Director of Gaming at Betfair.

Habbo Hotel has 12 different language versions and users in 150 countries, and a total of more than four million young people visiting the service every month. Nevertheless, and although Sulake’s net revenue in 2012 was approximately 22 million euros, the company’s wasn’t making any profits from its social meeting places and games.

Sulake was founded in 2000 and employs roughly 50 people today.