Activision Blizzard video games buys King Digital for $5.9 bn

SAN FRANCISCO - Agence France-Presse

AFP photo

US video game producer Activision Blizzard announced late Nov. 2 that it was buying King Digital Entertainment, best known for its "Candy Crush Saga" mobile game, for $5.9 billion.

Activision, whose games include the "Call of Duty" series, said in a statement the purchase "will create one of the largest global entertainment networks with over half a billion combined monthly active users in 196 countries."  

California-based Activision has some of the best-known video game titles on the market, including "World of Warcraft," "Diablo," "Guitar Hero," "Skylander" and most recently "Destiny."  

Activision said it believes the addition of King's business, which it called highly-complementary, will position it "as a global leader in interactive entertainment across mobile, console and PC platforms."  

It added that the move "positions the company for future growth."  

Since 2003 King Digital has "built one of the largest player networks on mobile and Facebook, with 474 million monthly active users in the third quarter (of) 2015," King CEO Riccardo Zacconi said in the joint statement.
 
The "Call of Duty" first-person shooter franchise is one of the best-selling console game series in the world, while "Candy Crush" is among the most popular games on mobile devices.
 
The purchase, approved by the boards of directors of both companies, has King's shareholders receiving $18.00 in cash per share "comprising a total equity value of $5.9 billion and an enterprise value of $5.0 billion," according to the statement.    

That represents a 20 percent premium over King's closing price on October 30, it added.    

Activision said it is using some $3.6 billion of offshore cash as well as a $2.3-billion incremental term loan to pay for the purchase.
 
King is based in Dublin, but the joint press statement was datelined London and Santa Monica, California.
 
The transaction, "which is subject to approval by King's shareholders and the Irish High Court" as well as other antitrust authorities, should be completed by the second quarter of 2016.
 
"The combined revenues and profits solidify our position as the largest, most profitable standalone company in interactive entertainment," said Activision Blizzard CEO Bobby Kotick.
 
"With a combined global network of more than half a billion monthly active users, our potential to reach audiences around the world... enables us to deliver great games to even bigger audiences than ever before."          
Activision plans to let King operate independently under Zacconi and its creative director Sebastian Knutsson, and will provide King "with experience, support and investment to continue to build" on their legacy, Kotick said.
 
King has focused on a business model that allows users to play a game for free, but pay extra for additional features. Many of its games run on less sophisticated smartphones, therefore reaching a wider public.
 
Activision's games on the other hand are played on pricy video game consoles or computers. Its games are priced in the $30 - $60 range.
 
Mobile gaming is "the largest and fastest-growing area of interactive entertainment," expected to generate more than "$36 billion of revenue by the end of 2015 and grow cumulatively by over 50 percent from 2015 to 2019," the statement read.
 
Activision also surpassed market expectations for the third quarter of 2015. Along with the merger statement it said that it posted a net profit of $127 million, for a net revenue of $990 million, as compared with $753 million for the third quarter of 2014.
 
King, on the other hand, has seen better days.    

Its shares closed Nov. 2 at $15.54 on the New York stock exchange, well below its introductory price of $22.50.
 
Candy Crush remains a top seller - it is third in downloads in the Apple App Store - but the company has struggled to replicate the game's success.