Activision Blizzard Agrees to Acquire King Digital Entertainment -- Update

By Sarah E. Needleman

Activision Blizzard Inc. late Monday said it is acquiring King Digital Entertainment PLC for $3.4 billion in cash plus debt, combining two giants in the videogame industry.

The deal gives Activision, a powerhouse in console videogames with hit franchises such as "Call of Duty" and "World of Warcraft," a beachhead in the fast-growing business of mobile games.

King shot to fame in 2012 with its hit "Candy Crush Saga," helping to position casual and inexpensive smartphone apps as a viable alternative to pricier games played on TVs and personal computers. While many of King's other mobile games haven't reached the same level of success, "Candy Crush" and its sequel are still among the top-grossing apps on Apple Inc.'s App Store.

Activision said it is paying $18 a share, a 20% premium to King's 4 p.m. ET price of $14.96 on the New York Stock Exchange on Oct. 30. On Monday, King shares rose 3.9% to $15.54. Activision said the deal has a total equity value of $5.9 billion.

In announcing the deal, Activision reported a profit of 21 cents a share, compared with 23 cents a year earlier. Analysts had expected profit of 15 cents a share, according to Thomson Reuters. The company also generated $1.04 billion in revenue, down from with $1.17 billion a year earlier, but above Wall Street's expectation of $951.7 million.

The deal for King is Activision's latest effort to grow beyond the living room game system. Last month, the company announced the launch of a new division dedicated to competitive videogames, or so-called e-sports.

Activision said the acquisition, which is taking place through a subsidiary ABS Partners C.V., will be accretive to 2016 adjusted revenue and per-share earnings by about 30%. The companies will have a combined active monthly user base of nearly 550 million, Activision said.

Activision Blizzard has more than 7,500 employees world-wide and is based in Santa Monica, Calif.

King, which is based in the United Kingdom and has 1,600 employees, will continue to operate as an independent unit under Chief Executive Riccardo Zacconi, Activision said in its prepared statement.

"We are largely using cash on the balance sheet," Activision Chief Executive Bobby Kotick said in an interview. He said that the deal, which has its origins in a meeting between the companies three years ago, is Activision's second largest after Blizzard Entertainment.

Mr. Zacconi, in the interview, said the deal acquisition represents an opportunity to extend its user base beyond its stronghold of women and casual gamers.

Write to Sarah E. Needleman at sarah.needleman@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

(END) Dow Jones Newswires

November 03, 2015 00:56 ET (05:56 GMT)

Activision Blizzard (NASDAQ:ATVI)
Historical Stock Chart
From Jun 2024 to Jul 2024