Activision Blizzard Acquires Candy Crush Developer King for $5.9 Billion

Goodness, that last sentence sounds condescending. Does Austin really think people here unquestioningly play Tony Hawk sequels with no awareness of the world around them? That combined with the replacement of the word saga instead of skater makes it sound almost unbelievably flippant after a fairly grounded and quite genuinely informative article. It isn't related to the rest of the article and only really serves as an undeserved gut-punch to the practically non-existent demographic of people who completely resist criticism of modern Activision games just when their support in games media seems to be waning, GB more than anywhere. Just trying to be constructive; the rest of the article was excellent and I appreciate the extra effort in terms of information and images.

@scrawnto: it's only 5.9b due to the US currency still using pennies.

"Tekken's King, dejected after realizing that Activision wasn't buying his rights for $5.9 billion. Armored King could not be reached for comment."

This was the best part of the article. SMH and LOL'ing at this.

Know it makes a little more sense. Also bravo on the images in the article.

Hey, maybe they just really wanted to publish a game with "Saga" in its title and wanted to avoid any risk of getting sued.

Look, if Armored King isn't going to weigh in on this situation I just don't know what to think.

Poor Armor King. I hope he can return the giant yacht I heard he bought immediately after hearing this deal.

Its really pisses me off when these huge companies subvert taxes. You realize if US companies payed the taxes they avoid on a yearly basis, it would be enough to wipe out the national debt, end poverty and send everyone to college for free. Thank you capitalism!

It's absolutely reprehensible that Activision is able to get out of $1,000,000,000 in taxes.

They basically have cheat codes in the economy.

Corporations that do that shit should get nerfed. Every last one of them. Make them pay it all back.

Shameful, despicable, immoral, and conniving business tactics.

"But are a number of factors that may have made King an attractive purchase for Activision."

Should be a "there" in between "But" and "are".

"There were 474 million active users in the third quarter of 2015, which is more people than use Twitter."

"than" should be "that"

"It's not not an uncommon tactic..."

One too many "nots".

Giant Bomb has never really been the gaming site that breaks the news. No need to rush out this article!

Good points raised all around anyway! You people poo-pooing Activision Blizzard's shrewd tax moves obviously don't understand this is how capitalism incentivizes hard work!

@holyxion: Huh! I wrote it as a dig at Activision's treatment of the Tony Hawk franchise, not a dig at people who played THPS6 (who I have no beef with), but in retrospect I can totally see how it might've come across like that! My bad!

@homelessbird:Got it, thanks!

@josephknows: Thanks! "Than" is definitely what I meant in second sentence though. And for the record, multiple people proofread most of the articles I post. Sometimes typos and errors slip by anyway. That's just the nature of the thing.

@ominousbedroom: call of candy is brilliant. I just sent them an email referencing that comment.

I'm also kinda sad for King.

I mean the Tekken character not the company.

Yea this country makes No sense.

I love the fact that Activision paid more for a company whose only popular game is Candy Crush Saga than Disney paid for the rights of Star Wars.

It just seems so ridiculous to me.

Best Deal!?!?!?

you mean NO CENTS AM I RIGHT GUYS

It makes perfect sense actually... You give someone the opportunity to make and save lots of money, and you want them to give it back if they don't have to, out of some kind of moral obligation to society at large? Yyyeeaaaaa.... Not gonna happen friend.Try communism instead, then.

Avoiding $1 billion in taxes is certainly a good incentive, but not enough of one to warrant the total pricetag for King on its own. While it's easy to imagine them cranking out some Warcraft-based Candy Crush clones and the like, integration and companion apps for larger games seems like it is much more likely, and for much more than just taking up time while waiting around for a group.

My prediction is that this will lead to some sort of horrible new form of microtransaction-based cash shop within the larger franchises. perhaps a sort of 'daily quest' would be set up where you can play a Candy Crush-style level for some sort of benefit (experience points, gold, random item, other things depending on the game in question, etc). Of course, you'd only get one shot (maybe two or three) at clearing it per day, but you'd be able to pay more to try again in the event of a failure, or perhaps even to double up on rewards by buying the ability to complete more than one stage per day (similar to buying more fatigue points, not at all an uncommon concept in mobile gaming).

Yeah and then spend 5.9 billion rupees on charms

@austin_walker Thanks for the interesting story about this. Something I haven't seen discussed a lot in articles about this acquisition in that King makes about $500MM a year in profit on about $2Bln/year in revenue. Activision bought them for about 12x their annual profit. For comparison, the PopCap acquisition you mentioned happened at about 7.5x. The publicly traded publishers in this industry are valued in the stock market at between 25-40x their annual profits. In other words, while $5.9Bln is definitely a lot of money, you could argue it would be worth it for Activision even if the only thing they got out of it was being able to cash those future Candy Crush checks.

I am sure that they are trying to get everything out of the deal that they can though. As you point out, I'm sure they are very interested in that giant user base.

And for what it is worth, I think the tax loophole sucks.

Thanks again!

I'm no small (or large) business man, but this seems like a bad move.

How is Candy Crush worth more than Star Wars. HOW?!

Dat stock doe.

Technically they still have the same amount provided King's value doesn't fall through the floor, it's just a transfer of liquidity to assets.

@prehnra: The second part of your first sentence is correct but not the first part. They are currently making 500Bil to 600Bil every three months. People need to start realizing this is where the big companies are looking at. We are niche. We will are not the mainstream we think we are. When Metal Gear Solid 5 needs 5 Years of development and X number of sales to make less than 190Mil, minus cost to make without marketing they just doubled their money.

Developers who make the games we like are seeing this. What incentive do they have with making thoughtful games with original mechanics when all they get is community grief and maybe getting some of their money back. Support the game devs, creator and modders you like, talk about their products and what they mean to you. Enjoy the games we have because they are all passion projects made by talented people who can work as a tech at any other financially secure company without being harassed or berated by armchair programmers.

If you think the industry is bad now. We are already looking at an industry mostly owned by handful of large companies, they will get their money one way or another.

I don't care for either company, now I can focus my disinterest in one company.

@captainthunderpants: Candy Crush didn't come pre-installed in my Windows 10... are you certain about this?

@djkommunist: NAILED IT

King as a company was sitting on a boatload of cash which you have to remember was part of this deal price, but that cash just comes back to the purchaser. If anyone is curious, here's how deal valuation works:

King as of it's 2Q reporting had $1,220,235,000 in Assets and $352,619,000 in Liabilities.

Therefore, it had net $867,616,000 in assets. ($785,883,000 of that is straight CASH.)

So subtract the assets from the $5.9B purchase price and you get $5,032,284,000.

To find the multiple Activision paid, divide that reduced purchase price by the trailing twelve month profits of King which are $565,710,000.

Your end result is Activision only paid an earnings multiple of 8.9x. That's an 11.24% current return on investment if growth is flat. That's actually incredibly cheap for a gaming company of King's size. Activision is buying the company for 25% cheaper than the public did when King IPOed just last March 2014.

Given Activision's current cost of capital of 12.6%, they're betting they can grow King's profits by at least 12% in the near future, or they're planning on juicing the return up by partially funding it with debt. Given Activision's current capital structure (50/50 Debt/Equity mix), my bet is they juice it up with debt. Expect to see them hit up the U.S. bond market in 1Q 2016 for $2.2B in long term debt so they can close the deal by 2Q 2016. The debt leverage juices the return on equity past their cost of capital and this has the added tax benefit of giving them interest deductions in the U.S. for debt used to purchase foreign income that won't ever be repatriated.

The numbers look fine and this deal is great on paper, whether the business realities line up is to be seen. Personally, I think Activision will do fine on this deal even if King's profits decline in the near term.

The Destiny Halloween candy quest was a dead giveaway.

@scrawnto: King is a publicly traded company, so they have to buy out the stock holders. They're paying $18 a share, and to purchase the company, they have to buy all of the shares. So that 5.9 Billion is made up of a huge amount of $18 increments.

So they're debating over 18 or 19 dollars per share, and the shares add up to this crazy big amount.

Don't blame the company; blame Congress. What kind of idiot would a CEO/CFO have to be to spend $1B they didn't have to? Of COURSE they use the tax dodges available to them. If you want to throw stones at Activision, you'd be better off questioning whether or not those tax savings will ever make it to their dev teams in the form of better wages and salaries.

@thuggish: Yes I am. http://www.pcworld.com/article/2922508/windows-10-will-ship-with-candy-crush-saga-preinstalled.html

Lower taxes = cheaper and more varied products for the consumer, higher wages for the employee. Also allows the business to take more/bigger risks with developing new IPs (and hiring people), since with a bigger profit margin, they have more financial padding to fall back on. Why would they NOT try to pay the least amount of taxes possible?

But who am i kidding - all corporations are evil, right? Isn't that the narrative?

Both companies have made super shitty moves in the past, so this is a match made in heaven.

Too bad the name 'Super Evil Megacorp' is already taken by some indie dev. Maybe they could buy that one too for a couple 'bil?!

@thuggish: Nice dog.

Like everybody else I thought that's a bit much for a dying mobile developer. But they don't seem to be doing bad at all if you look at their wiki page.

Corporations aren't evil, they're not people, they just do what's economically best for their shareholders.

But, that's why lower corporate taxes do not mean higher wages. There is no reason for a business to increase the wages of it's employees unless those employees are actually in high demand and they serve to make a profit by keeping those employees. From the perspective of a corporation, wage rises without a future pay-off are wasteful. Trickle-down/Supply-side economics is generally considered to be total bullshit by the economic orthodoxy, even a recent report by the IMF rejects it.

Lower taxes also mean poorer public services.

@troll93: I feel very validated that my spur of the moment guesses based on zero real-world experience were near the mark!

@talonar: Like the article said, an install base of 474M users worth of data is how. Data is where the money is going these days for sure. It's why places like Facebook buy up WhatsApp. To get their data and the user base. Also just getting the Star Wars license is one thing, doing something with it is going to cost you so much more. Episode 7 has a budget of $200M and while it's almost certainly going to make that back and then some, it's still a large additional cost. The additional cost of developing a mobile game for a user base of 474M isn't anywhere near that, and your ramp up costs to deploy and run the game are pretty shallow too when the company you just bought already handles all of that.

I'll go see Star Wars, and Disney will get ZERO data from me because all I'm doing is buy a ticket. They won't know what I like or dislike and they won't have a record of anything I thought of during the movie.

@cuuniyevo: I'm going to blame all parties involved. There are plenty of corporations that don't put their money offshore. It's a shitty practice and companies that do it don't get their noses rubbed in it nearly enough.

Activision is responsible for their own actions.

Eventually business transactions hit a certain dollar value, and the logic barrier is shattered.

@dudeglove: It doesn't particularly help us in the long run or even the short term, but we've been like that for a good while now. The EU really hates us for it, I'm not sure how we still get away with it.

Also, CD Projekt RED keeps its cash in some mediterranean island because it has better tax laws than Poland.

@corvak: Hey, you're not allowed mention when CDPR do something questionable. They're the second coming of Christ. Only big nasty people like Activision ever do stuff like dodge taxes.