Activision Blizzard announced Monday that it will be buying Candy Crush developer King Digital Entertainment for the small sum of $5.9 billion. It's worth noting that Activision bought King at a premium, $18.00 a share, around 20% over King's 30 October 2015 closing price. That money is in the form of $3.6 billion in offshore cash and $2.3 billion from Bank of America and Goldman Sachs loans. Just for some comparison this deal is $1.9 billion more than Disney paid for Lucas Films, including Star Wars.
This will give Activision, the company behind Call of Duty and World of Warcraft, ownership of not only some of the biggest console and PC games in existence, but also arguably the biggest mobile game developer around. King reports having 474 million monthly active users in the third quarter 2015 and their 6.9 million paying players spend over $24 ($24.45) on average monthly. Robert Kotick shed some light on the motivation for the buy in a statement saying:
"Riccardo, Sebastian, and Stephane are some of the best minds in the business, and we have long-admired King for consistently creating incredibly fun, deeply engaging free-to-play games that capture the imaginations of players across ages and demographics. Activision Blizzard will provide King with experience, support and investment to continue to build on their tremendous legacy and reach new potential. We share an unwavering commitment to attracting and developing the best talent in the business, and we are excited about what we will be able to accomplish together."
Besides the PR spin on why Activision bought King, King's billions in revenue probably factored in a small bit as well. As of now King will still be headed by the same people (Riccardo Zacconi, Sebastian Knutsson, and Stephane Kurgan) so don't expect any drastic changes to how King has operated up to this point with the agreement mentioning long term employment set up for all of them. King will function as an independent arm of Activision and has no plans of moving its locations of business or firing any employees. In fact King plans on launching a new 'mid-core title' and three new games from existing franchises by the end of 2016. Since Activision put Hearthstone out on mobile it looked like they wanted to get into mobile gaming more, and this acquisition has made it happen. Expect more and more mobile games from Activision moving forward. As Zacconi puts it:
"We believe that the Acquisition will position us very well for the next phase of our company’s evolution and will bring clear benefits to our players and employees. We will combine our expertise in mobile and free-to-play with Activision Blizzard’s world-class brands and proven track record of building and sustaining the most successful franchises, to bring the best games in the world to millions of players worldwide."
Activision will be holding an investor meeting later today to hold a Q&A about the acquisition. With Call of Duty: Black Ops 3 releasing soon (November 6) and the buying of King, one thing is absolutely certain: Activision is going to be making a lot of money this quarter.
Quick Take
This is a smart move by Activision if it wants to start focusing on mobile gaming seriously, with Kings already established library, consumer base and experience in mobile gaming they have a great foundation to move more into mobile gaming. One thing that does worry me is that free-to-play models and micro-transactions might find their way into Activision's big console and PC games, which would irritate more than a few people, myself included.
