Activision Blizzard will acquire “Candy Crush Saga” creator King Digital Entertainment (KING.N) as part of a drive into the mobile gaming market.
Video game heavyweight Activision wants to profit from the faster-growing mobile gaming market and is willing to spend big to do so. At $5.9 billion the acquisition is the biggest ever of a mobile gaming company, according to Reuters.
Acquisition met with mixed response from analysts
King has not managed to follow up the success of Candy Crush, with “Farm Heroes” and “Pet Rescue” both failing to reach the heady heights of their predecessor. Some analysts believe the company may be a one-hit wonder, but Activision apparently thinks differently.
Cowen & Co analysts said that the acquisition was “an absolute steal,” but others in the profession were not so positive. However research firm Newzoo predicts that mobile games sales are to grow 21% this year to $20.6 billion, and Activision is now well placed to profit.
Activision will pay $18 per share in cash. King’s share price has dipped since its 2012 IPO, when shares sold at $22.50 each. King still relies heavily on Candy Crush to generate revenue, which fell 16% in Q2.
Can Activision help King repeat success of Candy Crush?
Other mobile gaming companies have struggled to repeat the success of blockbuster titles like Candy Crush. Rovio, maker of Angry Birds, and Zygna have both struggled to capitalize on early successes.
Activision claims that the deal will bring its games to a wider audience, given that 60% of King’s players are female. The new combined company will boast over 500 million monthly active users.
The company said that its estimated 2016 adjusted revenue and earnings would increase by approximately 30% as a result of the deal. It will use $3.6 billion in cash to fund the deal while the rest will be borrowed.
King will be led by CEO Riccard Zacconi and continue to function as an independent unit. Zacconi told Reuters that Activision was an attractive proposition because of its expertise in building long-lasting franchises.
According to Thomson Reuters data, private equity fund Apax [APAX.UL] listed King in 2014 and maintains a 44.68% stake in the company. For the deal to be finalized it must be approved by shareholders and the Irish High Court, but it is expected to be completed by spring 2016.
