Call of Duty's Activision buys Candy Crush creator in gargantuan mobile gaming push

King Digital Entertainment's Candy Crush Saga is seen being played on an Apple iPad Mini the day Activision Blizzard announced it will buy King Digital.
King Digital Entertainment's Candy Crush Saga is seen being played on an Apple iPad Mini the day Activision Blizzard announced it will buy King Digital. PHOTO: EPA

SAN FRANCISCO (AFP) - The video game giant behind the Call of Duty series is buying the maker of Candy Crush Saga, King Digital Entertainment, for US$5.9 billion (S$8.26 billion) - bringing together a market of half a billion gamers worldwide.

The move signals a major push into mobile for the California-based Activision Blizzard, which has some of the best-known console games on the market, including World of Warcraft, Guitar Hero, Skylander and most recently Destiny.

Activision announced the acquisition late Monday, saying it would "create one of the largest global entertainment networks".

Its Call of Duty first-person shooter franchise is one of the world's top-selling console games, while the fiercely addictive Candy Crush is among the most popular on mobile devices.

"We think now is the right time to enter mobile gaming in a meaningful way," said Activision chief executive Bob Kotick. "Widespread mobile access around the world has opened significant demand for engaging, fun content that players can enjoy anytime, anywhere."

Activision said it believes the addition of King's line of games will position it "as a global leader in interactive entertainment across mobile, console and PC platforms".

"With a combined global network of more than half a billion monthly active users, our potential to reach audiences around the world... enables us to deliver great games to even bigger audiences than ever before," said Kotick.

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

The purchase, approved by the boards of directors of both companies, "positions the company for future growth", it said.

"Candy Crush Saga" established King Digital as a global gaming power on cell phones and other mobile devices. The company counted 474 million monthly active users in the third quarter this year, said CEO Riccardo Zacconi in the joint statement.

Candy Crush remains a top seller - it is third in downloads in the Apple app store - but the company has struggled to replicate the game's success with other products.

King's shareholders will receive US$18.00 in cash per share, giving the deal a value of US$5.9 billion.

That represents a 20 per cent premium over King's closing share price on Oct 30.

But it is well below the company's high-priced IPO, which sold at US$22.50 per share in March 2014.

Activision said it is using some US$3.6 billion of offshore cash as well as a US$2.3 billion incremental term loan to pay for the purchase.

The transaction is expected to be completed by the second quarter of 2016, pending approval from shareholders and authorities.

"The combined revenues and profits solidify our position as the largest, most profitable standalone company in interactive entertainment," said Kotick.

Activision plans to let King operate independently under Zacconi and its creative director Sebastian Knutsson, and will provide King "with experience, support and investment to continue to build" on their legacy, Kotick said.

King has pioneered a business model that allows users to start playing for free - but pay extra for additional features. Many of its games run on less sophisticated smartphones, requiring little hardware investment from users, and therefore reaching a wider public.

Activision's games on the other hand are played on video game consoles or computers. Its games are priced in the US$30-US$60 range.

Mobile gaming is "the largest and fastest-growing area of interactive entertainment", the two companies said.

Activision said the deal is expected to generate more than US$36 billion of revenue by the end of 2015 and grow by over 50 per cent by 2019.

Activision shares were up 1.5 per cent at US$35.09 in early trade Tuesday, while King shares jumped 14.0 per cent to US$17.72.