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.
What more can you say really, a damn stupid decision IMO.
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.
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
I'm sure this made a lot of sense, somewhere, to some clever financial types.
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
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
Are for 500 millions users and for the workforce of super talented people King has gathered in the past years.
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.
It still seems like a huge amount of money to me, of course xD
Edited 1 times. Last edit by Petter Solberg on 3rd November 2015 2:15pm
Indeed, including subsidiaries like ILM, skywalker sound and lucasarts.
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
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
Edited 1 times. Last edit by Sandy Lobban on 3rd November 2015 4:23pm