Activision Blizzard Shares Drop on $6 Billion King Digital Deal

Activision Blizzard, the company behind hit video games “Call of Duty” and “World of Warcraft”, expands and cements its place in the gaming industry by acquiring “Candy Crush Saga” developer King Digital Entertainment for a whopping $5.9 billion, Reuters reports.

Activision, famous for its military-themed “Call of Duty” and fantasy-based “World of Warcraft series”, hopes to become the global leader in interactive gaming across mobile, PC, and console platforms.

With the King acquisition, Activision Blizzard gains two of the top five highest-grossing mobile games in the USA with Candy Crush Saga and Candy Crush Soda Saga.

The fast-growing mobile gaming segment is expected to generate more than US$36 billion in revenue this year, according to Activision. 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.

Further to the news, shares in King jumped 15 per cent to close at $17.54 yesterday in NY, while Activision stock went up almost 4 per cent to $35.82. Although the company has been trying to lessen its reliance on its most popular game, Candy Crush Saga, when it launched three years ago, it still makes about a third of their profits. For the third quarter, GAAP net revenues from digital channels were a record $629 million. The company would continue to encourage KING to build more of their disruptive, legacy games as Activision would continue to fund and help the company to reach new potential. Activision said the deal, which is taking place through a subsidiary ABS Partners C.V., will be accretive to 2016 adjusted revenue and per-share earnings by about 30%.

As for King Digital, the company has experienced a slight wind-fall in its recent performance.

Activision said its expanded audience would “reach across casual and core gamers, female and male players, and developed and emerging markets throughout the world”.

Activision, based in Santa Monica, California, will pay $18 in cash for each King share, 20 percent over its Friday closing price.

It isn’t surprising then, that big game companies are taking an interest in mobile gaming.