Activision to buy 'Candy Crush' developer King Digital for $5.9B
Gaming giant Activision Blizzard late Monday announced an agreement to purchase all outstanding shares of Candy Crush Saga developer King Digital Entertainment in a deal worth $5.9 billion.
Announced by both Activision and King Digital on their respective websites, the huge commitment represents a daring move for the established console game maker. Until now, Activision has only dabbled in the mobile space, focusing most of its attention on AAA titles including "Call of Duty," the world's biggest console franchise.
Activision will pay $18 per share as part of the agreement, much less than the $22.50 per share King was trading at when it went public last year. The stock struggled on concerns that King has been largely unable to replicate the success of Candy Crush Saga, an all-time top-grossing freemium app that took mobile and Internet platforms by storm in 2012.
In-app Candy Crush payments drove $1.4 billion in revenue for fiscal 2014 and while users are still conducting micro-transactions, income is on the decline at $206 million for the quarter ending in June. King's Candy Crush Soda follow-up also ranks as a top-five app, but revenues are nowhere near its predecessor. In the most recent quarter, King's profits dropped 28 percent year over year.
It remains unclear how Activision plans to leverage King's IP, though representatives from both companies were expectedly upbeat on the takeover.
The transaction is expected to be completed by Spring 2016, pending approval of King's shareholders and the Irish High Court.
Announced by both Activision and King Digital on their respective websites, the huge commitment represents a daring move for the established console game maker. Until now, Activision has only dabbled in the mobile space, focusing most of its attention on AAA titles including "Call of Duty," the world's biggest console franchise.
Activision will pay $18 per share as part of the agreement, much less than the $22.50 per share King was trading at when it went public last year. The stock struggled on concerns that King has been largely unable to replicate the success of Candy Crush Saga, an all-time top-grossing freemium app that took mobile and Internet platforms by storm in 2012.
In-app Candy Crush payments drove $1.4 billion in revenue for fiscal 2014 and while users are still conducting micro-transactions, income is on the decline at $206 million for the quarter ending in June. King's Candy Crush Soda follow-up also ranks as a top-five app, but revenues are nowhere near its predecessor. In the most recent quarter, King's profits dropped 28 percent year over year.
It remains unclear how Activision plans to leverage King's IP, though representatives from both companies were expectedly upbeat on the takeover.
The transaction is expected to be completed by Spring 2016, pending approval of King's shareholders and the Irish High Court.
Comments
Another bunch of Swedish IT-billionares. Congratulations!
(No wonder property prices in Stockholm are accelerating to absolutely insane levels)
More like "people install this after being spammed with attempts to auto-download it via ads?"
Activision is going to be in for a shock when they realize that they lose a large amount of the install base with every cell phone generation.
It's a crazy world when Star Wars is worth $4B, but Candy Crush is worth $6B
Not only that, but it's a one-hit wonder that brought in less then $3B total gross income.
It says here King.com was founded in Sweden but has been hopping around in the name of tax avoidance as per usual for billionaires:
http://techcitynews.com/2014/02/24/king-moves-company-to-ireland-ahead-of-ipo/
They settled on Ireland before they went public. Activision has $14b in assets with $4.4b cash. They are using $3.4b cash and the rest as a loan to buy them. King's revenue has been falling year-over-year but fairly slowly (still ~$0.5b net income per year) and the company has over $1.2b in assets, which will be acquired by Activision. Some of this can be used to pay back the loan.
Activision has indicated plans to push microtransactions in games. They own Skylanders and their ongoing monetization takes the form of toy purchases:
http://www.consulgamer.com/operations/microtransactions-in-the-real-world-with-toys-for-bob/468/
They own the publishing rights to the Destiny franchise made by Halo-maker Bungie:
http://www.polygon.com/2015/10/5/9457851/destiny-microtransactions-emotes-tess-everis
http://www.inquisitr.com/2518064/destiny-players-throwing-money-at-screens-for-emote-microtransactions/
The King team have been the most successful company at monetizing games on mobile so Activision can have the team apply this to their other franchises to come up with ways to cross-market products and figure out how to use microtransaction models that players will want to pay for. There will be 4 Destiny games made, one every 2 years with DLCs and upgrades in-between.
It's a high evaluation, even after deducting assets and ongoing Candy Crush income but it will instantly push Activision visibility to the top of the mobile App Stores, above EA. EA bought PopCap games for games like Plants vs Zombies, Bejeweled etc for $650m. Their mobile revenue (not net income) in 2014 was $460m so that will probably have already paid for itself over the years since they bought it but Candy Crush has a wide demographic. If Activision can market Skylanders directly to mothers playing Candy Crush then they can grow that revenue:
https://www.skylanders.com/apps
The revenue is already over $3b total over a number of years, mostly from toy sales. They only sell a few million copies of the console games but the accessory toy sets can be $20 each. All these companies love having direct marketing opportunities.
And that copied Bejeweled.
These valuations are insane.
I thought IAPs were limited to $99?
"...hopping around in the name of tax avoidance as per usual for billionaires"
OMG... Marvin you are at your absolute worst when you present your political views.
So what? Who cares? You'd do it as well if you were in the same position. Apple does it as well as everyone else. It's not a big deal.
Businesses will go where they can best legally maximize their returns for their investors. They are required to do so, otherwise they become a target for lawsuits.
That was merely a statement of fact explaining the change of location. People were understandably confused as to how the sale of a Swedish founded company ended up in Ireland.
The "as per usual for billionaires" is your own political spin and I personally find it embarrassing.