Candy Crush Saga: Apax Partners Poised to Make Killing in IPO

Wednesday, 19 Mar 2014 08:10 AM

By Nick Sanchez

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Apax Partners LLP are poised to make a 10,000 percent gain on a 2005 investment it made in King Digital Entertainment Plc when the creators of the wildly successful smartphone game "Candy Crush Saga" make the company's initial public offering.

An inside source told Bloomberg that Apax, a London buyout firm, invested $35 million in King. After laying out its terms last week, King is valued at a potential $7.6 billion, making Apex's stake worth $3.5 billion.

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A Geneva-based venture-capital firm, Index Ventures, who invested $6 million in 2005 also stands to make a 10,000 percent gain.

Candy Crush Saga — which Ted Cruz has reached level 217 on — has an impressive 93 million daily active users, according to DailyFinance.com.

Although it is the top-grossing game on the iPhone, many are skeptical of King's IPO, comparing it to Zynga's "Farmville," which was the most popular game on Facebook in 2011. Since then, shares of Zynga are down 42 percent, according to MarketWatch.

Candy Crush accounts for a whopping 78 percent of King's revenue, leaving many uncomfortable with the level of revenue diversification. It will have to prove that it is not just a one-hit wonder but a reliable hit-maker in the mobile games space. "Pet Rescue Saga," another one of its games, attracts only 15 million daily users, while "Bubble Witch Saga" attracts 3 million.

Compounding this problem is “a relatively small percentage of our player network accounts for a large portion of our revenue, and if we are unable to continue to retain players or if they decrease their spending, our revenue could be harmed,” the company states in its S-1 filing with the Securities and Exchange Commission.

Although Apax stands to gain handsomely from their investment, the firm stopped investing in startup companies in 2007 under the guidance of CEO Martin Halusa to move focus to the leveraged buyouts aspect of the business, which the firm had been engaged in since 1993. The firm was founded in the late 1970s by Alan Patricof and Ronald Cohen.

King's revenue saw more than a ten-fold rise in revenues last year to $1.9 billion, and announced its IPO in February. It would sell 22.2 million shares for $21 to $24 each and trade under KING on the New York Stock Exchange.

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