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Activision Blizzard to buy King for $5.9 billion

CEO Kotick believes deal will create "the largest, most profitable company in interactive entertainment"

In what is surely the biggest acquisition deal of the year, Activision Blizzard has agreed to purchase the outstanding shares of King Digital Entertainment for $5.9 billion.

The deal price is $18 per share, a 20 per cent premium over King's closing price on October 30, 2015, and a 23 per cent premium over its one month weighted average.

"The combined revenues and profits solidify our position as the largest, most profitable standalone company in interactive entertainment," said Activision Blizzard CEO Bobby Kotick in a statement. "With a combined global network of more than half a billion monthly active users, our potential to reach audiences around the world on the device of their choosing enables us to deliver great games to even bigger audiences than ever before."

The claim about the company's profitability is based on their combined revenue over the last 12 months: Activision Blizzard had non-GAAP revenues of $4.7 billion and King had adjusted revenues of $2.1 billion. The deal will add around 30 per cent to Activision Blizzard's expected 2016 revenue.

Activision Blizzard's board of directors unanimously approved the acquisition deal. It is now subject to the approval of King's shareholders and the Irish High Court, and will require clearance antitrust authorities.

The acquisition is expected to complete in spring 2016. King will continue to be led by Chief Executive Officer Riccardo Zacconi, Chief Creative Officer Sebastian Knutsson, and Chief Operating Officer Stephane Kurgan.

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Latest comments (17)

Darren Adams Managing Director, ChaosTrendA year ago
Really, 5.9 billion for King?? Are they fucking mad?? What a waste of money, another Zynga type overvaluation by people that don't seem to live in the real world.

What more can you say really, a damn stupid decision IMO.
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Fabien Roussot Developer, Gunjin Games LtdA year ago
Some are willing to cash out 2.5 Billions for Minecraft, why not 6 Billions for Candy Crush ?
The acquisition makes sense though, even if the price tag is questionable. Blizzard has the Core audience on PC (Warcraft, Starcraft), the mid-code/casual audience on console (CoD) and the Core audience on mobile (Hearthstone), now they also so have the casual audience on mobile. Whether it's worth 6 Billions, I don't have the right data to comment informatively.
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Andrew Goodchild Studying development, Train2GameA year ago
Because we are hearing how King is in decline, which Minecraft does not seem to be in. Seriously Minecraft is still taking the lions share of a lot of kids playing time, when my 10 year old meets another kid, you can still guarantee Minecraft is one of the first three topics of conversation, and more often than not, the other kid joins in enthusiastically. Now my 6 year old girl is starting doing the same.
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Darren Adams Managing Director, ChaosTrendA year ago
Some are willing to cash out 2.5 Billions for Minecraft, why not 6 Billions for Candy Crush?
Simple, I wouldn't have paid 2.5b odd for minecraft, these valuations are way off IMO.

EDIT: I suppose to explain myself and not just come off as some skeptical doomsayer, let's take Minecraft as test case for example.

[dodgy math mode]
Using 2013 figures for Mojang which came in at around $326 million we can estimate that you get a 10% rise in revenue in a perfect world. Now for the 2.5 billion (1,000,000,000) they paid for the company, they will look to make double what they paid for Minecraft in the first 5-10 years.

300,000,000 x 10 = 3,000,000,000, so to make 5billion it would take around 15-16 years to return the investment if they left it alone and did nothing. So a generous estimation for return on investment would be around 10-12 years. We all know how fickle the market is and to buy a games studio or game based on that one title is madness if you ask me. There is only so much milking that can be done from games, the customers are more savvy than most of these execs think.
[/dodgy math mode]

Edited 4 times. Last edit by Darren Adams on 3rd November 2015 10:09am

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Nick McCrea Gentleman, Pocket StarshipA year ago
I saw the price, and the first thought that sprung to my head was that Disney paid $4 billion and change for *Star Wars*, the most lucrative IP in entertainment history, with a rich mythology that's practically woven into the culture of everyone under the age of 45. My grandkids will literally be running about waving plastic lightsabers in the year 2050.

I'm sure this made a lot of sense, somewhere, to some clever financial types.
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Darren Adams Managing Director, ChaosTrendA year ago
Exactly Nick.

4b for Star Wars is a reasonable cost for such a huge franchise that has shown it has lasting appeal, but King.....Candy Crush....5.9b??? No way.

Edited 1 times. Last edit by Darren Adams on 3rd November 2015 10:13am

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Anthony Gowland Consulting F2P Game Designer, Ant WorkshopA year ago
$5.9B for a huge audience of middle aged women, young girls and casual players that ATVI so far has been largely unable to connect with. The fastest growing gaming segment. Plus a couple of games thrown in for free.

User acquisition costs in mobile really are skyrocketing, eh?

(Also, why would anyone think Microsoft sees selling copies of Minecraft as the only value that acquisition will bring? They have the most popular paid app on iOS, for example - you don't think there's a value to them in that? If MC can help them shift units of Hololens to players, it'll have been worth the cost for that alone, I suspect.)

Edited 1 times. Last edit by Anthony Gowland on 3rd November 2015 10:24am

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Ennio De Nucci Game Desginer, Supermassive GamesA year ago
5.9 billions are not for Candy Crush.
Are for 500 millions users and for the workforce of super talented people King has gathered in the past years.
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Darren Adams Managing Director, ChaosTrendA year ago
Time will tell.......again....
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Darren Adams Managing Director, ChaosTrendA year ago
You are right John; just because Zynga crashed and burned doesn't mean the same thing will happen to King.. Kingvision...ActiKing???

But you could make a guess to how risky this move is based on history and all the signs point to another potential bubble company. And to pay 5.9b for it? About 2-3b too much IMO. But as always these are just opinions and I, like everyone else speculating what will happen could be wrong.
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David Canela Game & Audio Designer A year ago
I've seen the comparison to Disney's acquisition of Star Wars a lot and it just seems like apples and oranges to me. One is an IP, the other a company with employees, know how& data, a large user base, several IPs and running games that generate revenue as we speak.

It still seems like a huge amount of money to me, of course xD
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Petter Solberg Freelance Writer & Artist, A year ago
I thought the $4 billion price tag was for Lucasfilm, not just the Star Wars IP?

Edited 1 times. Last edit by Petter Solberg on 3rd November 2015 2:15pm

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Neil Young Programmer, Rebellion DevelopmentsA year ago
"I thought the $4 billion price tag was for Lucasfilm, not just the Star Wars IP?"

Indeed, including subsidiaries like ILM, skywalker sound and lucasarts.
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Anthony ChanA year ago
Hmmm... I think there are a lot of naysayers here who don't really understand the concept of M&A. The price tag on this company may be slightly overpriced (20% premium) but they are not just buying Candy Crush. King may have had troubles with its execution, and may appear to be declining as of late. BUT, their franchises such as Candy Crush, Farm Heroes, Pet Rescue, and Bubble Witch are not trivial assets. In addition, they have teams and offices worldwide and their games have been localized in over 200 countries/markets.

People need to pull their heads out of the sand (or their ass) when it comes to these things - and think what each bring to the table. King has well known franchises, a track record of turning the most mundane concepts into gold mines, and the ability to steal candy from babies and the elderly alike (apparently 340 million of them in 100s of different languages). Pair that up with Activision who has a similar ability to create IP, and then milk the hell out of it while making record breaking profits year after year.

The premium was to ensure the deal goes smoothly - 20% premium is not something to just pass over as an investor faced with a decision to tender stock.

I am actually quite hopeful - the marriage of skills, experience, and market saturation. If anything indies and no-names beware, Activision has acquired a proven and aggressive company who sunk the originators of candy crush and all other subsequent clones. Activision has pretty much dominated the FPS market, and its subsidiary is still the 'owners' of the MMORPG market as well as one of the most successful RTS in history. This marriage just means that Activision's money and power are now making silly looking mobile time wasters -- meaning indies who are making the same thing, your pie just got smaller.

Edited 1 times. Last edit by Anthony Chan on 3rd November 2015 3:12pm

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Darren Adams Managing Director, ChaosTrendA year ago
@Anthony

Whilst I, and probably most people here respect the different opinions voiced, remember they are just opinions.

Edited 1 times. Last edit by Darren Adams on 3rd November 2015 3:27pm

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Sandy Lobban Founder, Noise Me UpA year ago
theyll get that money back in no time if they sell into china. King is far better placed to develop that market than a console developer ever would be.

Edited 1 times. Last edit by Sandy Lobban on 3rd November 2015 4:23pm

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David Canela Game & Audio Designer A year ago
ok, I guess then comparing makes a lot more sense. Since people just throw around "Star Wars" I assumed it was just the IP...
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