US computer game company Activision Blizzard, which produces World
of Warcraft and Call of Duty, is buying King Digital Entertainment, the
creator of Candy Crush Saga.
The deal is worth $5.9bn (£3.8bn).
Activision said the acquisition would make it a global leader in
interactive entertainment across mobile, console and PC platforms.
It added the combined firm would have more than half a billion
monthly active users in 196 countries.
The Call of Duty series is one of the world's best selling console
games, while Candy Crush Saga is among the most popular games on
mobile devices.
Video game publishers are switching from the physical sale of games
to digital growth as consumers move from consoles to playing on
smartphones and tablets.
Wider appeal
In a statement, Activision Blizzard chief executive Bobby Kotick said:
"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."
Mr Kotick told the Reuters news agency that the company wanted to
broaden its reach and appeal to a larger demographic.
He said that 60% of King Digital Entertainment's players were female,
and that no games console or hardware, besides a smartphone, was
needed to access its games.
King Digital Entertainment has focused on a business model that
allows users to play a game for free, but pay extra for additional
features.
Analysis: Leo Kelion, BBC Technology desk editor
Candy Crush describes itself as the "sweetest game around" - but even
so there's no guarantee that the $5.9bn (£3.8bn) takeover of King.com
won't leave both investors and players with a bitter taste.
The big-budget, action-centric PC and console titles that Californian
buyer Activision Blizzard is best known for are quite different to the
more simple puzzle and role-playing mobile and web-based games its
Stockholm and London-headquartered acquisition is skilled at making.
Furthermore, the size of the acquisition dwarfs other mega-deals in an
industry already prone to consolidation.
For comparison's sake, other recent mergers include:
Microsoft's $2.5bn purchase of Minecraft's developer Mojang
Facebook's $2bn takeover of virtual reality headset-maker Oculus
Amazon's $970m acquisition of the games community Twitch
Electronic Art's $750m payment for Plants v Zombies developer
PopCap
Read Leo's analysis in full here.
Asia reach
The international success of Candy Crush Saga has given it exposure
to high growth markets in Asia, such as China, Japan and South
Korea.
Activision's games are played on more expensive video game consoles
or computers, with games costing between £20-£40.
King Digital Entertainment, which has its main offices in London and
Stockholm, will continue to operate as an independent unit led by
chief executive Riccardo Zacconi.
Mr Zacconi said: "Since 2003, we have built one of the largest player
networks on mobile and Facebook, with 474 million monthly active
users in the third quarter 2015."
We believe that the acquisition will position us very well for the next
phase of our company's evolution."
Activision Blizzard is offering $18 (£11.66) in cash for each King share,
and the deal is expected to boost Activision's earnings by about 30%.
King Digital Entertainment floated on the New York Stock Exchange in
March last year with the original share price being offered at $22.50
(£14.60).
In early trade in New York its share price went up 14% to $17.72 .
'Global hit'
Candy Crush Saga, which was first launched on Facebook and
smartphones in 2012, caught the public imagination and still makes up
about a third of the company's revenue.
Even though the company has produced more than 200 games,
including the popular Bubble Witch and Farm Heroes, it has yet to
repeat the success it found with Candy Crush Saga.
"Candy Crush Saga was such a massive global hit, it's a very difficult
challenge to replicate that even if they release sequels or expansions
to the original theme or release new titles," said Piers Harding-Rolls,
Head of Games at IHS Technology. "The share price reflects that."
"It's a big move by Activision who have gained access to an audience
that does not overlap with its existing market, particularly in Asia," Mr
Harding-Rolls added.
Fast-growing market
King Digital Entertainment helped boost its number of daily active
users with the launch of Candy Crush Soda Saga in late 2014, but there
has been a decline in player spending on their number one game.
Analyst, Eric Opara at Edison Investment Research said the deal made
sense for both companies.
"For Activision, it will provide a step-change in its penetration of the
mobile gaming channel, which is the fastest growing segment of the
video games market."
"For King, it offers the potential to leverage its mobile and social
gaming expertise across Activision's large games portfolio and reduces
its reliance on its own blockbuster games like Candy Crush," he said.
The deal is expected to be completed by the second quarter of 2016,
assuming approval from shareholders and regulators.
