The acquisition is the biggest-ever acquisition of a mobile gaming company, which pip’s Microsoft’s $2.5-billion purchase of Swedish game maker Mojang past year.
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The company will acquire “Candy Crush Saga” from creator King Digital Entertainment (NYSE: KING) in a $5.9 billion deal. In addition to this announcement Activision Blizzard also posted its latest financial results and it looks like like over 7 million players signed-up for the Overwatch closed beta which kicked off on October 27.
As of this writing, it is expected that the acquisition will be completed by Spring 2016.
“It’s the next step”, said King co-founder Zacconi, “this opens up opportunities we didn’t have before”.
Investors have questioned how much growth is ahead for King, best known for its wildly popular “Candy Crush” series of casual games.
CNET reports that King was founded in 2003 and uses a freemium model in which the player can play the game for free but can buy virtual currency or other goods in order to enhance the game or speed up progress. More than 1.4 billion games are played on a daily basis.
Candy Crush is the crown jewel of King, accounting for approximately a third of revenue. It opened at $20.50 on the New York Stock Exchange, below its $22.50 IPO from the company. Candy Crush remains a top seller – it is third in downloads in the Apple App store – but the company has struggled to replicate the game’s success.
Seeds of the acquisition were planted three years ago as management between the two companies met at that time for initial discussions, with them escalating this past April.
European private equity fund Apax listed King in 2014 and holds a 44.68 percent stake in the company, according to Thomson Reuters data.
“We think now is the right time to enter mobile gaming in a meaningful way”, said Activision chief executive Bob Kotick.
So this Activision expansion seems to make sense because the publisher is sticking to its area of strength with games and investing in a sector of that business that it does not already have a firm grasp on. Its games are priced in the US$30-$60 range. The company now boasts that more than 100 million viewers a month are watching content on the platform. Activision said the deal, which is taking place through a subsidiary ABS Partners C.V., will be accretive to 2016 adjusted revenue and per-share earnings by about 30%. But many gamers are women, and they like to play on mobile devices. It’s about swallowing up a massive, worldwide userbase, expanding the number of people hooked on Activision products, to whom it can sell all sorts of things into the future.
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“They have a great franchise focus, as well as the ability to create and invent new franchises”, Kotick said.
