Deal is reported to be around $6 billion!
[toggler title=”TL:DR” ] Activision Blizzard picks up Candy Crush maker King Digital for $6 billion. King Digital will still operate independently. King’s last quarter totaled 61% off games unrelated to Candy Crush Saga. Deal should be complete in spring 2016. Candy Crush’s biggest competition is Hearthstone. 60% of King’s player base is female. [/toggler]
[dropcap size=small]O[/dropcap]n Monday, November 2nd, Blizzard/Activision made a deal with King Digital for $5.9 billion. This partnership brings together two of the top five grossing mobile games (Candy Crush and Candy Crush Soda Saga) with Call of Duty, the top global console video game franchise in the world, along with World of Warcraft, one of the biggest PC gaming franchise in the world.
After the deal was made, shares for King jumped up 14%, while Activision shares increased by 6%.
“They built an incredible business,” said Activision Blizzard CEO Robert Kotick during an interview. “When we think about people who create compelling content and satisfy large audiences, they’ve been brilliant at it. We thought it would make a great opportunity for us to enter a new market.” with an incredibly talented management team.”
Riccardo Zacconi, CEO of King, will continue to run as an independent unit with Chief Creative Officer Sebastian Knutsson and COO Stephane Kurgan.
“We will combine our expertise in mobile and free-to-play with Activision Blizzard’s world-class brands and proven track record of building and sustaining the most successful franchises,” Zacconi said in a statement.
Both companies expect the deal to be complete sometime this spring. The deal has to go through a process that includes the approval of King’s shareholders and the Irish High Court. During a conference call on November 3rd, Chief Operating Officer Thomas Tippl said that Activision will operate independently, which has been true since Blizzard merged with Activision in 2008.
Much of King Digital’s success has been off their mobile game series, Candy Crush Saga, one of the best games on Facebook and mobile phones. King began trading stock in March 2014 on The New York Stock Exchange. King has been pushing to prove to everyone that they are not a one-hit wonder.
King’s last quarter totaled 61% in its grossing books (money that is spent by players) came from games unrelated to the Candy Crush Saga. That’s a 41% difference from a year ago. King’s adjusted profit in the second quarter was $155.5 million, a significant drop from the $188 million they had in the same quarter last year. King’s stock, which was valued at $22.50 in it’s IPO (Initial Public Offering), now trades at $15.54.
This deal allows Activision to expand their company into mobile gaming to go along with their success creating games for consoles. Mobile game spending looks to hit as high as $32 billion this year, according to IHS Technology.
“There is a huge fan base, and we weren’t really creating a lot of content for that enormous fan base,” says Kotick, noting talks with King on a potential deal started last spring.
The biggest competition to the Candy Crush Saga is a competitive card game Hearthstone: Heroes of Warcraft from Blizzard Entertainment. In May, Hearthstone topped 30 million players on their free game. “Other than Hearthstone, we haven’t really participated all that much,” says Kotick of Activision’s involvement in the mobile games space.
Kotick also said that 60% of King’s player base are women. “We love the idea of being able to reach an entirely new audience,” he says. “Our games have been historically have been more focused on male audiences. We now have the opportunity to address hundreds of millions of female customers, which is very exciting.”
Michael Pachter of Webrush Securities says that King’s mobile prowess should pay off for Activision Blizzard. “Activision had over $3 billion in foreign cash, and King generates $800 million a year in free cash flow,” he said. “If we believe that King can keep replicating its formula for keeping its players engaged, the deal should end up being a good one.”
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