King Digital Entertainment is one of the biggest casual gaming companies in the world, producing top titles such as Candy Crush Saga, Farm Heroes Saga, and Candy Crush Soda Saga. While some players dislike the “nag your friends” method employed in overcoming obstacles in the games, the games’ popularity on mobile platforms and Facebook speaks for itself.
In a move reminiscent of PopCap Games being acquired by EA Games in 2011, King announced alongside Activision Blizzard that ABS Partners CV (a subsidiary of Activision Blizzard) was purchasing all outstanding shares of King’s stock for $5.9 billion. Assuming that the purchase is approved by King’s shareholders and the Irish High Court, King will become a fully-owned studio within Activision Blizzard in spring 2016.
Activision Blizzard is best known for games such as Starcraft, World of Warcraft, and the Call of Duty series. It has attempted to branch out into the realm of free-to-play microtransaction-based games like King produces, however; most notably with the recent Hearthstone: Heroes of Warcraft card game. The addition of King’s portfolio of games will supplement the company’s existing microtransaction-based offerings on Facebook and mobile, giving Activision Blizzard additional revenue from already established games – as soon as the acquisition is completed.
Growth by acquisition is a fairly common business tactic, and makes an easy way for a company to beef up its holdings in areas where it might have been weak previously. That doesn’t mean that it always works out well, however. Zynga famously bought Words With Friends developer Newtoy, Inc. in 2010 during the height of that game’s popularity, but none of the company’s post-acquisition offerings developed nearly the popularity of Words and there hasn’t been a release from the company since 2013. Likewise, EA purchased PopCap following the amazing success of Plants vs. Zombies, but the EA-produced mobile sequel never achieved the original game’s popularity. The company has found success with the third-person Garden Warfare spinoff shooter series, however.
So is this purchase a good move for Activision Blizzard? Almost certainly. King Digital’s shares are worth $5.6 billion and the company itself is valued at $3.9 billion (including debt and other items that bring down its overall value), and it recorded around $2.14 billion in revenue in the past 12 months. Activision Blizzard will recoup the expense of purchasing the company’s shares within three years from revenue alone, and it could occur faster if King releases new games in that time that become popular.
Of course, the backlash on this purchase could be significant. King Digital and the microtransaction model it epitomizes are despised by a lot of gamers, and many could see this as Activision Blizzard trying to pander to the lowest common denominator for the sake of profit. It’s unlikely that the purchase will affect the company’s core games, however, so even if there is a backlash it will likely die down soon enough.
Source: King Digital/Activision Blizzard