Activision Blizzard to buy 'Candy Crush' maker King for $5.9B

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Activision Blizzard Eyes King Digital for $5.9B

DUBLIN (Reuters) -- Video game maker Activision Blizzard it to buy "Candy Crush Saga" creator King Digital Entertainment for $5.9 billion, as the heavyweight of console and PC gaming makes a major push into the faster-growing mobile market.

The deal would be one of the biggest in the industry in recent years, more than twice the size of Microsoft's $2.5 billion purchase of "Minecraft" maker Mojang last year, and the biggest-ever acquisition of a mobile gaming company.

The failure of King to replicate the success of Candy Crush with follow-up titles such as "Farm Heroes" and "Pet Rescue" has led some investors to worry it may be a one-hit wonder.

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But Activision is betting its experience in sustaining long-running blockbuster franchises like "Call of Duty" and "World of Warcraft" can help it develop new hit series.

The deal also gives the U.S. company a major presence in the mobile market, where games sales are expected to grow 21 percent this year to $20.6 billion, according to research firm Newzoo.

See photos of the "Candy Crush" game:

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King Digital Entertainment's 'Candy Crush'
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Activision Blizzard to buy 'Candy Crush' maker King for $5.9B
A person plays on his tablet with Candy Crush Saga games developed by British King Digital Entertainment, on March 6, 2014, in Lille, northern France. The game is free, but players can pay for in-app extras to help them pass up through its more than 500 levels. Millions of commuters, teenagers -- even pensioners -- clock in daily to test their skills at the game, which involves lining up tiny pieces of colored sweets to make them vanish from the screen of their computer or mobile phone. AFP PHOTO PHILIPPE HUGUEN (Photo credit should read PHILIPPE HUGUEN/AFP/Getty Images)
A detail from the online game "Candy Crush Saga" is shown on a computer screen, Monday, March 24, 2014 in New York. King Digital, the company behind the popular, addictive mobile is expected to begin trading on the New York Stock Exchange on March 26. The Dublin, Ireland-based company could be valued as high as $7.6 billion if its initial public offering prices at $24 per share, the upper end of its expected range. (AP Photo/Mark Lennihan)
A user plays the 'Candy Crush Saga' puzzle game on an Apple.Inc iPhone 5 in this arranged photograph in London, U.K., on Tuesday, Feb. 18, 2014. King Digital Entertainment Plc, maker of the popular 'Candy Crush Saga' puzzle game on Facebook Inc. and Apple Inc. products, said it will raise $500 million in a U.S. share sale. Photographer: Simon Dawson/Bloomberg via Getty Images
The King Digital Entertainment Plc logo and 'Candy Crush Saga' game are displayed on an Apple Inc. iPhone 5s and iPad Air in this arranged photograph in Washington, D.C., U.S., on Tuesday, Feb. 18, 2014. King Digital Entertainment Plc, the maker of popular smartphone games including 'Candy Crush Saga' and 'Pet Rescue Saga,' is beginning an adventure of its own on a path to becoming a public company. Photographer: Andrew Harrer/Bloomberg via Getty Images
Candy Crush app icon on mobile phone.
The King Digital Entertainment Plc logo is displayed on an Apple Inc. iPhone 5s and iPad Air in this arranged photograph in Washington, D.C., U.S., on Tuesday, Feb. 18, 2014. King Digital Entertainment Plc, the maker of popular smartphone games including 'Candy Crush Saga' and 'Pet Rescue Saga,' is beginning an adventure of its own on a path to becoming a public company. Photographer: Andrew Harrer/Bloomberg via Getty Images
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That compares with expected growth of 7 percent for computer games and 2 percent for TV and console games, although they will still represent the lion's share of the $91.5 billion overall industry, according to the industry researchers.


Activision is paying $18 per share in cash, a takeover premium of 16 percent over King's current market value, showing how the company's fortunes have flagged since its 2012 initial public offering at $22.50 per share.

The company's net revenue -- still heavily reliant on Candy Crush -- fell 16 percent in the second quarter.

500 MILLION USERS

With the gaming business driven as much by hits as the movie business, some young companies like Finland's Rovio, the maker of Angry Birds, and online games company Zygna have faded from prominence.

Analysts from Jefferies said the task facing King of replicating the success of Candy Crush was a "daunting task".

"We expect a heavy dose of skepticism from investors especially given the large deal size," said the brokerage, which nonetheless recommends investors continue buying Activision shares.

Activision said buying King would help broaden the reach of its games, adding that 60 percent of King's players were female, and that the combined company would have more than 500 million monthly active users across the world.

It said the deal would add to its estimated 2016 adjusted revenue and earnings by about 30 percent. It added it would use $3.6 billion of cash held offshore to fund the acquisition, and borrow the rest.

King will continue to operate as an independent unit led by Chief Executive Riccardo Zacconi, who told Reuters that Activision appealed to him because of the company's expertise in building long-lasting franchises.

European private equity fund Apax listed King in 2014 and holds a 44.68 percent stake in the company, according to Thomson Reuters data.

The deal, expected to be completed by spring 2016, is subject to approval by King's shareholders and the Irish High Court, and clearances by antitrust authorities.

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