Activision Pays $5.9 Bln For Its Candy Crush On King Digital

(RTTNews) - The Call of Duty has prompted Activision Blizzard (ATVI) to look beyond organic growth. In a mega deal announced late Monday, Activision said it would buy King Digital Entertainment (KING), the firm behind the popular mobile game offering Candy Crush Saga for $18 per share in cash or a total equity value of $5.9 billion.

The deal will be accretive to Activision's estimated 2016 non-GAAP revenues and earnings per share by around 30 percent. The company is expected to earn $1.57 per share on revenues of $5 billion.

The purchase price implies a 20 percent premium over King's closing price on October 30.

King Entertainment, originally headquartered in Sweden and is now headquartered in Dublin, Ireland, offered its shares to public in the U.S. in March 2014. The shares of the London-based company were listed on the NYSE on March 26th, 2014.

The boards of directors of both companies unanimously approved the acquisition, which is expected to be completed by Spring 2016.

The deal is expected to position Activision as a global leader in interactive entertainment across various platforms such as mobile, console and PC.

The combined company will have a world-class interactive entertainment portfolio of top-performing franchises. This includes two of the top five highest-grossing mobile games in the U.S. - Candy Crush Saga, Candy Crush Soda Saga.

The portfolio will include Call of Duty, the world's most successful console game franchise, and World of Warcraft, the world's most successful personal computing franchise.

Blizzard Entertainment's Hearthstone: Heroes of Warcraft, StarCraft, and Diablo and Activision Publishing's Guitar Hero, Skylanders and Destiny, also will be part of the portfolio.

Bobby Kotick, CEO of Activision Blizzard, said, "The combined revenues and profits solidify our position as the largest, most profitable standalone company in interactive entertainment. With a combined global network of more than half a billion monthly active users, our potential to reach audiences around the world on the device of their choosing enables us to deliver great games to even bigger audiences than ever before."

King will continue to be led as an independent operating unit by Chief Executive Officer Riccardo Zacconi, Chief Creative Officer Sebastian Knutsson, and Chief Operating Officer Stephane Kurgan.

Separately, Activision Blizzard said its third-quarter net income was $127 million, compared to a loss of $23 million in the previous year. Earnings per share were $0.17, in comparison with a loss of $0.03 in the prior year.

Adjusted earnings per share were $0.21, while it totaled $0.23 for the third quarter of 2014.

On average, 19 Analysts polled by Thomson Reuters expected the company to report earnings of $0.15 per share for the quarter. Analysts' estimates typically exclude special items.

Net revenues grew to $990 million from $753 million last year. Adjusted net revenues were $1.04 billion, as compared with $1.17 billion for the third quarter of 2014. Wall Street expected revenues of $950.94 billion.

Looking ahead to the fourth quarter, the company expects GAAP earnings per share of $0.09 and adjusted earnings per share of $0.82.

Net revenues are estimated to be $1.218 billion with adjusted revenues projected at $2.148 billion.

Analysts expect quarterly earnings of $0.89 on revenues of $2.24 billion.

Looking ahead to calendar year 2015, the company now expects earnings per share to be $1.07 and adjusted earnings per share of $1.31. Previously, the company expected GAAP earnings per share to be $1.06 and non-GAAP earnings per share of $1.30.

Net revenues are estimated to be $4.530 billion, with adjusted net revenues estimated at $4.650 billion. Wall Street currently is looking for fiscal year 2015 earnings of $1.34 per share on annual revenues of $4.66 billion.

The prior projection was for GAAP net revenues of $4.425 billion, and non-GAAP net revenues of $4.600 billion for calendar year 2015.

ATVI closed up 0.6 percent on Monday at $34.57, and rose 0.4 percent in the extended trade.

KING closed up 3.9 percent on Monday at $15.54.