* To offer 22.2 million shares at $21-$24/share
* To list shares on NYSE under symbol "KING"
* Shares scheduled to start trading on March 26 -
* Rev rose to $602 mln in Q4 2013 from $22 mln in Q1 2012
(Adds mobile gaming industry context, company background)
By Aman Shah
March 12 King Digital Entertainment Plc, maker
of hit mobile phone game "Candy Crush Saga", expects to be worth
up to $7.6 billion when it goes public this month in the United
States, amid concerns about its over reliance on the game.
King will hope to benefit from its focus on the estimated
$17 billion market for mobile game apps and avoid the fate of
rivals such as Zynga Inc, which has struggled to make
its games as popular on phones as they are online.
"Candy Crush," which involves moving candies to make a line
of three in the same color, was the most downloaded free app and
top revenue-grossing app in 2013. The game accounts for nearly
three-quarters of King's revenue.
Dublin-based King said on Wednesday it expects to price its
IPO at $21-$24 per share, valuing it at up to $7.6 billion -
slightly higher than Hasbro Inc, the 90-year old maker
of Monopoly, Scrabble and Nerf.
"I think the bankers have priced the deal in a way so that
initial investors can realize a first-day pop in the stock,"
said Josef Schuster, founder of IPOX Schuster, a Chicago-based
IPO research and investment house.
Twitter Inc's successful IPO in November and a
surge in Facebook Inc's shares have fueled speculation
that other tech firms could go public, including music-streaming
service Spotify, lodging website AirBnB and mobile payments
However, Schuster and other analysts questioned if King
could maintain its breakneck growth rate.
"I think the valuation of a P/E ratio of 13 for a
high-growth company is indeed reflecting a scepticism about the
ability to continue growing at such a rapid pace," said Jay
Ritter, a professor and IPO expert at the University of Florida.
"The ability to come up with future games and get people to
pay for the game is a big question mark."
Riccardo Zacconi, who has led King since co-founding the
company in Sweden in 2003, will hold a 9.5 percent stake in King
after the IPO. Zacconi, 47, worked with online dating site
uDate.com Ltd till it was bought by InterActive Corp in 2002.
"Candy Crush" launched on Facebook in April 2012. The game
was released on Apple devices in November that year, followed by
an app for Android devices a month later.
The game has been downloaded more than 500 million times
since its launch. The basic games are free, but players must pay
for add-ons or extra "lives".
Such stellar popularity has helped King's revenue grow to
$602 million in the fourth quarter of 2013 from $22 million in
the first quarter of 2012.
But most of that growth was fueled by "Candy Crush" rather
than any of the 180 games King provides through mobile phones,
Facebook and its own website.
King, which had 665 employees at Dec. 31, has focused on
launching more games on mobile platforms, a market that analysts
expect will grow to $17 billion this year from just $6 billion
Zynga's stock price has halved since its IPO in 2011 as the
popularity of "Farmville" waned, while Finland's Rovio has
struggled to replicate the success of "Angry Birds".
Zynga acquired mobile game developer NaturalMotion for $527
million and cut over 300 jobs this year, in an effort to narrow
its focus to mobile gaming.
To be sure, King's revenue for the quarter ended Dec. 31
declined 3 percent from the preceding quarter, which the company
said was due to a fall in "Candy Crush" gross bookings.
However, bookings rose for its other games such as "Pet
Rescue Saga" and "Farm Heroes Saga". About 73 percent of total
bookings in the quarter came from mobile users.
King's five games for mobiles have drawn a "substantial fan
base" Zacconi said in a filing with the U.S. Securities and
Exchange Commission. (r.reuters.com/bar57v).
"The opportunity in front of us is exciting: mobile usage is
exploding and games are commanding the lion's share of time
King's IPO is scheduled to be priced on March 25, two
underwriters told Reuters. The stock will start trading on the
New York Stock Exchange under the symbol "KING" on March 26.
Of the 22.2 million shares on sale in the offering, the
company will sell 15.5 million, while stockholders, including
Apax Ventures, will sell 6.7 million shares, King said.
Unlike most other tech companies that have gone public
recently, King is profitable, has no debt and generated positive
cash flow from operations for each of the last nine years. It
posted profit before tax of $714.3 million in 2013.
In February, an average of 144 million daily active users
played the company's games more than 1.4 billion times per day.
At the top-end of the planned range, the IPO will raise as
much as $532.8 million, slightly more than the $500 million
placeholder figure it disclosed in its first public filing in
Entities related to Apax will own 44.2 percent of the
company following the offering, according to the IPO filing.
JP Morgan, Credit Suisse and BofA Merrill Lynch are lead
underwriters for the offering.
(Additional reporting by Neha Dimri in Bangalore; Editing by
Maju Samuel and Savio D'Souza)