Activision Blizzard to buy ‘Candy Crush’ maker King Digital for US$5.9b

Video game publishers are shifting to lucrative digital business

PUBLISHED : Tuesday, 03 November, 2015, 4:44pm
UPDATED : Tuesday, 03 November, 2015, 4:44pm

Video game maker Activision Blizzard is buying Candy Crush Saga creator King Digital Entertainment for US$5.9 billion to strengthen its mobile games portfolio.

ABS Partners, a unit of Activision, will acquire King shares for US$18 each in cash, representing a 16 per cent premium to King's closing price on Monday.

The addition of King's mobile games would position Activision as a global leader in interactive entertainment across mobile, console and PC platforms, Activision said.

Video game publishers are shifting to the lucrative digital business from physical sales of games as consumers shift from consoles to playing on smartphones and tablets.

The fast-growing mobile gaming segment is expected to generate more than US$36 billion in revenue this year, according to Activision.

This is a fantastic opportunity for us to create compelling content for new demographics
Bobby Kotick, Activision CEO

Activision chief executive Bobby Kotick said buying King would help broaden the reach of its games and expand into new demographics, adding that 60 per cent of King's players were female and that no gaming consoles or hardware, besides a phone, was needed to play King's games.

“You have such broad reach. This is a fantastic opportunity for us to create compelling content for new demographics,” Kotick said.

Activision, which owns popular game franchises such as World of Warcraft, Call of Duty, and Diablo, said the deal gives the combined company more than 500 million monthly active users across the world and would add about 30 per cent to Activision's estimated 2016 adjusted revenue and earnings.

Dublin-based King will continue to operate as an independent operating unit led by chief executive Riccardo Zacconi. Zacconi said Activision appealed to him because of the company's expertise in building long-lasting franchises.

King, which went public in March last year, has been struggling to boost bookings – an indicator of future revenue.

The deal, expected to be completed by spring, is subject to approval by King's shareholders and the Irish High Court, and clearances by antitrust authorities.

Activision said it would use US$3.6 billion of offshore cash and borrow the rest from Bank of America Merrill Lynch and Goldman Sachs Bank as incremental lenders.

Activision also reported third-quarter earnings of 17 US cents per share, compared with a loss of 3 US cents a year earlier. Excluding items, it earned 21 US cents per share. Revenue rose 31 per cent to US$990 million. Analysts had expected earnings of 15 US cents a share, on revenue of US$950.4 million.