King Digital Seeks Cover to Solve Candy Crush Conundum
November 03 2015 - 9:39AM
Dow Jones News
By Jens Hansegard and Anna Molin
STOCKHOLM--King Digital PLC's decision to sell itself to
Activision Blizzard Inc. for $5.9 billion could help the Swedish
studio behind the Candy Crush puzzle game solve the conundrum of
how to keep converting players into paying customers.
King Digital earned its crown as the mobile game industry's
leader by number of users when it launched the Candy Crush Saga
game on mobile phones and tablets in 2012.
The game, in which players have to match candies by colors, has
consistently been a big money spinner and allowed King Digital to
go public in 2014, when it priced its shares at $22.50.
But the company has struggled to duplicate Candy Crush's
success, triggering concerns among analysts and investors about the
strength of its business model. Those doubts were evident even on
King Digital's stock-market debut on March 26 last year when the
stock lost 16%.
"King never really solved the problem of extreme dependence on a
single franchise," mobile games analyst and consultant Tero
Kuittinen said. "A one-horse mobile vendor just isn't a great fit
with the stock market."
Under terms of the agreed offer, King Digital shareholders stand
to receive $18 a share in cash, a 20% premium to King's 4 p.m. ET
price of $14.96 on the New York Stock Exchange on Oct. 30.
King Digital's decision to become part a broader group, though
Activision Blizzard said the business will remain independent under
Chief Executive Ricarrdo Zacconi, highlights how the mobile-game
industry is going through turbulent times. Amid growing competition
from many newcomers, some developers are having difficulties
monetizing pricey game developments.
Disaffection with the stock market has also beset the broader
tech sector.
At the end of last month, French music-streaming service Deezer
postponed its initial public offering citing "market conditions."
In the U.S., only 14% of IPOs this year have been undertaken by
tech companies, the smallest percentage since at least the
mid-1990s, according to Dealogic.
One King Digital shareholder has reasons to celebrate.
Private-equity fund Apax Partners, which plowed EUR29 million
into King Digital in 2005 and holds a 45% interest in the company,
is set to walk away with proceeds of about $2.5 billion, according
to a person familiar with the matter.
Once Activision Blizzard completes its acquisition of King
Digital--just one year after Microsoft Corp. bought Mojang, the
makers of Minecraft--nearly all the large Swedish games studios
will have foreign owners.
Dice, which is making the new "Star Wars Battlefront" game is
owned by Electronic Arts Inc. and Massive Entertainment, which is
developing "Tom Clancy's The Division," is owned by France's
Ubisoft Entertainment SA.
King Digital was set up by Sweden's Sebastian Knutsson in 2003.
He has remained at the company as chief creative officer.
Write to Jens Hansegard at jens.hansegard@wsj.com and Anna Molin
at anna.molin@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
November 03, 2015 09:24 ET (14:24 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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