Activision Blizzard acquires mobile gaming firm King Digital for $5.9 bn

US game developer Activision Blizzard Inc yesterday struck  deal to buy Irish mobile gaming company, King Digital Entertainment Plc for approximately $5.9 billion, aiming to become a global leader in interactive gaming across mobile, console and PC platforms.

The acquisition is the biggest-ever acquisition of a mobile gaming company, which pip's Microsoft's $2.5-billion purchase of Swedish game maker Mojang last year.

Under the terms, King's shareholders will receive $18 per share in cash which represents a 20-per cent premium over King's stock price on 30 October, according to a joint statement.

Dublin-based King is a leading mobile game developer, which has more than 200 games in its portfolio including its blockbuster puzzle Candy Crush Saga, offering them in over 200 countries and territories across the globe through its websites King.com and Royalgames.com and also through Facebook, Apple App Store, Google Play Store etc.

The company's player networks on mobile and Facebook comprise around 474 million monthly active users as of the third quarter of 2015.

The combination will create one of the largest global entertainment networks with over half a billion combined monthly active users in over 196 countries, and also become a global leader in mobile gaming, the fastest growing area of interactive entertainment.

According to some estimates, the mobile gaming market is expected to generate over $36 billion of revenue by the end of 2015 and grow by over 50 per cent in the next four years.

Activision chief executive officer Robert (Bobby) Kotick said, ''The combined revenues and profits solidify our position as the largest, most profitable standalone company in interactive entertainment.''

Further to the news, shares in King jumped 15 per cent to close at $17.54 yesterday in New York, while Activision stock went up nearly 4 per cent to $35.82.

The deal has been unanimously approved by the boards of both the companies.

The transaction is expected to close in the second quarter of 2016, subject to customary closing conditions, and approvals from the Irish court and relevant competition authorities.

Santa Monica, California-based Activision Blizzard is an interactive entertainment major known for its games Call of Duty, Destiny, Skylanders, World of Warcraft and others. It has over 1,000 game titles which are played across the world in various platforms.

For the year ended September 2015, Activision's revenue was $4.9 billion and net income of $1.1 billion, while during the same period King reported revenue of $2.1 billion and profit of $600 million.

''Activision will provide King with experience, support and investment to continue to build on their tremendous legacy and reach new potential'',  Kotick said.

''We believe that the acquisition will position us very well for the next phase of our company's evolution and will bring clear benefits to our players and employees,'' said Riccardo Zacconi, chief executive officer of King.

''We will combine our expertise in mobile and free-to-play with Activision Blizzard's world-class brands and proven track record of building and sustaining the most successful franchises, to bring the best games in the world to millions of players worldwide,'' Zacconi added.

The merged company will have a portfolio comprising 10 of the world's most iconic games, with two of the top five highest grossing mobile games in the US, Candy Crush Saga and Candy Crush Soda Saga, the Call of Duty, World of Warcraft among others.

Activision intends to fund the deal with approximately $3.6 billion of offshore cash and the balance through term loans from Bank of America Merrill Lynch and Goldman Sachs Bank USA.

The acquisition will be accretive to Activision Blizzard's 2016 earnings by about 30 per cent and also significantly contribute to its free cash flow, the company said.

Activision has formed a wholly-owned subsidiary ABS Partners CV based in Netherlands to complete the deal.

Upon completion of the transaction, King will operate as an independent unit Activision Blizzard under Riccardo Zacconi and his team.

Activision Blizzard's financial advisers are Goldman Sachs and Bank of America Merrill Lynch, while King is advised by JP Morgan.