Activision to buy 'Candy Crush' developer King Digital for $5.9B

Posted:
in General Discussion edited November 2015
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.
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Comments

  • Reply 1 of 24
    People still play this? :/
  • Reply 2 of 24
    tundraboytundraboy Posts: 1,901member
    So, 5.9 billion is the going price for one hit wonders these days?
  • Reply 3 of 24

    Another bunch of Swedish IT-billionares. Congratulations!

     

    (No wonder property prices in Stockholm are accelerating to absolutely insane levels)

  • Reply 4 of 24
    misamisa Posts: 827member
    People still play this? :/

    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.
  • Reply 5 of 24
    19831983 Posts: 1,225member
    jonteponte wrote: »
    Another bunch of Swedish IT-billionares. Congratulations!

    (No wonder property prices in Stockholm are accelerating to absolutely insane levels)
    There was a mention in the article of the Irish High Court, are you sure they're not Irish, or is that Activision?
  • Reply 6 of 24

    It's a crazy world when Star Wars is worth $4B, but Candy Crush is worth $6B

  • Reply 7 of 24
    It's a crazy world when Star Wars is worth $4B, but Candy Crush is worth $6B
    Jar jar bunks is a massive negative value to star wars
  • Reply 8 of 24
    tundraboy wrote: »
    So, 5.9 billion is the going price for one hit wonders these days?

    Not only that, but it's a one-hit wonder that brought in less then $3B total gross income.
  • Reply 9 of 24
    MarvinMarvin Posts: 15,404moderator
    1983 wrote: »
    jonteponte wrote: »
    Another bunch of Swedish IT-billionares. Congratulations!

    (No wonder property prices in Stockholm are accelerating to absolutely insane levels)
    There was a mention in the article of the Irish High Court, are you sure they're not Irish, or is that Activision?

    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.
  • Reply 10 of 24
    dasanman69dasanman69 Posts: 13,002member
    tundraboy wrote: »
    So, 5.9 billion is the going price for one hit wonders these days?

    And that copied Bejeweled.
  • Reply 11 of 24
    quadra 610quadra 610 Posts: 6,757member
    Billions?

    These valuations are insane.
  • Reply 12 of 24
    Currently on the highest grossing iPhone App chart they have numbers - 4, 6, 20, 51, 55, 56. I imagine their rankings on the Google Play Store are similar or higher since freemium options seems to be the way most Android owners like to shop.
  • Reply 13 of 24
    richlrichl Posts: 2,213member

    I thought IAPs were limited to $99?

  • Reply 14 of 24
    This makes good business sense. Activision is not that entrenched in the mobile game segments. They are there but not heavily. This will help them move there and dominate rapidly. With AppleTV this will be huge for this company. Casual gaming is KING (no pun intended...seriously) when it comes to gaming overall. I am a serious gamer (not that good but serious) and love my custom gaming rig. Nothing mainstream will replace that experience. But there is a lot to be said for ez gaming. Experiences where you can hop on and off quickly. Where serious gaming you have to make a time investment to get a return. I estimate that I need to block off 1-2 hours to truly get value with pc gaming. Where as this mobile model for the masses you can get quick hitting updates in a minute or two.
  • Reply 15 of 24
    Marvin wrote: »
    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.

    "...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.
  • Reply 16 of 24
    sirlance99sirlance99 Posts: 1,295member
    Marvin wrote: »
    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.

    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.
  • Reply 17 of 24
    sirlance99 wrote: »
    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.
  • Reply 18 of 24
    MarvinMarvin Posts: 15,404moderator
    "...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.

    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.
  • Reply 19 of 24
    Marvin wrote: »
    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.
  • Reply 20 of 24
    Activision to become the next Konami: we're going mobile/casual/micropay baby!
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