Investors have never taken a shine to King Digital. Activision Blizzard saw that as an opportunity to add a new jewel to its crown.  The videogame publisher is acquiring King for $5.9 billion in cash. The per-share price of $18 lands King a nice premium of 21% over its 200-day moving average. It also values King about 11.3 times forward earnings—a multiple the stock has never commanded in the public market.  Investors have never taken a shine to King Digital. Activision Blizzard saw that as an opportunity to add a new jewel to its crown.  The videogame publisher is acquiring King for $5.9 billion in cash. The per-share price of $18 lands King a nice premium of 21% over its 200-day moving average. It also values King about 11.3 times forward earnings—a multiple the stock has never commanded in the public market.  Even so, that isn’t saying that much. Since it first listed shares at $22.50 in March of last year, King has closed above that level only once. Meanwhile, its multiple of forward earnings has averaged a 61% discount to that of the Nasdaq Composite.  So it is easy to see why Activision saw a bargain. But valuation alone won’t settle fears that Activision may be paying dearly for property in decline.  True, King is highly profitable, and generates enough excess cash to fund buybacks and a special dividend of $364 million last year. And King’s Candy Crush Saga mobile game is still the No. 3 top-grossing game app on Apple’s App Store more than three years after its initial release.  Yet King remains highly dependent on Candy Crush. Plus, its gross bookings peaked in late 2013 on a quarterly basis. The company said Tuesday that third-quarter bookings came in at $502 million, which was above its projection but still at a two-year low. Bookings measure the buying activity in King’s games, which are free to play. Full results for the third quarter will be reported Wednesday.  Activision is known for squeezing lots of life out of game franchises—the company will release its 12th iteration of “Call of Duty” this week. And Activision is primarily drawn to King’s 450 million monthly active users, spread across more than 200 countries. King also has an audience that skews about 60% female—a segment that traditional game publishers have struggled to reach.  Those factors could help Activision up its game in mobile. The trick will be taking its franchise magic, built in a console world, to the far-more-fickle mobile world. Getting this jewel to really sparkle won’t be easy, especially when Activision has paid so much for it.  Write to Dan Gallagher at dan.gallagher@wsj.com and Amir Mizroch at amir.mizroch@wsj.com
Activision is seemingly snapping up a bargain by buying King Digital. Whether that is the case depends on its ability to transfer its franchise magic to mobile.