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Activision to buy King Digital in $5.9bn games deal

Unifying major console and PC games Call of Duty and World of Warcraft with the leading mobile title Candy Crush Saga.

Activision Blizzard agreed to buy King Digital Entertainment for $5.9 billion, unifying major console and PC games Call of Duty and World of Warcraft with the leading mobile title Candy Crush Saga.

Activision will pay $18 a share in cash, a 16% premium to King Digital’s closing price of $15.54 Monday in New York. The boards of both companies have approved the transaction, Santa Monica, California-based Activision said Monday in a statement.

The agreement adds a top mobile publisher to the arsenal of the biggest US video-game maker, positioning Activision to capitalise on growing smartphone-based play. Mobile gaming is already the industry’s biggest category with projected revenue of $36 billion in 2015, according to the companies. That’s projected to grow by more than 50% by 2019. 

Activision Chief Executive Officer Bobby Kotick, who won independence from Vivendi SA, has guided the stock to a 72% increase this year, third-best in the Standard & Poor’s 500 Index. The shares fell less than 1% on Monday, to $34.57.

Offshore Cash

The company said it will use $3.6 billion of cash stored outside the US, and borrow the rest with an incremental $2.3 billion term loan from Bank of America Merrill Lynch and Goldman Sachs Bank.

The deal will boost Activision’s estimated non-GAAP revenue and earnings-per-share by about 30% in 2016, the company said.

King, based in Dublin, Ireland, will continue to be run by CEO Riccardo Zacconi as an independent unit of Activision with the deal expected to be completed by spring 2016. The Activision bid price of $18 is 20% below the $22.50 paid by investors in King’s 2014 initial public offering. 

King makes two of the five highest-grossing mobile games in the US, Candy Crush Saga and Candy Crush Soda Saga. Its shares, which rose steadily in October, advanced 3.9% on Monday, giving the company a market value of $4.9 billion, according to data compiled by Bloomberg.

©2015 Bloomberg News

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