Shares of Activision Blizzard (NASDAQ:ATVI) rallied throughout the day Tuesday after announcing plans to buy social and mobile game maker King Digital (NYSE:KING) for $5.9 billion in cash and debt.
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The deal, we’re told, is worth $5.9 billion.
The failure of Dublin-based King to replicate the success of Candy Crush with follow-up titles such as Farm Heroes and Pet Rescue has led a few investors to think it may be a one-hit wonder.
Activision Blizzard merged in 2008, and between them they are responsible for publishing a few of the biggest games on the market, such as Call of Duty and World of Warcraft. Mobile games spending, according to market researcher IHS Technology, will total $32 billion in 2015; in fact, mobile games are the largest mobile content category and also now comprise the largest games audience worldwide. Sales growth of 7% is expected for computer games, and a growth of 2% is expected for console games.
Under the terms, King’s shareholders will receive $18 per share in cash which represents a 20-per cent premium over King’s stock price on 30 October, according to a joint statement. The shares opened for trading at $33.35 and hit $37.8 on the upside, eventually ending the session at $35.82, with a gain of 3.62% or 1.25 points. King Digital’s iconic games Candy Crush and Candy Crush Soda are hugely popular with women.
Activision, whose action games appeal mainly to males, focuses mainly on console and PC-based games whereas King’s offerings are designed for mobile devices and playing online.
This will become the biggest deal in gaming industry since the game Minecraft was bought by Microsoft in 2014.
The unprecedented consolidation of two of the largest gaming houses in the world has resulted a unified gaming entity which will service over half billion users actively, in over 196 nations. It will also help Activision Blizzard diversify from consoles into the mobile gaming space, while giving it access to King’s 500 million monthly users.
King has struggled to follow up on the success of its Candy Crush series. Activision’s, ABS Partners division will purchase King.com shares for $18.
The game is already plagued with bugs and complaints, where accidental purchases are made with the unconfirmed click of a button and draining user’s wallets, and this new development could cause many more bugs.
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Activision Blizzard adds that the transaction is expected to be completed by spring 2016.
