The deal will allow Activision to go beyond traditional gaming systems and into the burgeoning mobile games market.
Activision Blizzard is buying King Digital Entertainment, the Brobdingnagian games company that created the chart-topping Candy Crush Saga game, merging two giants of the multibillion-dollar games market. The deal is worth $5.9 billion; Activision will pay $3.6 billion in cash in addition to a $2.3 billion loan from the Bank of America Merrill Lynch and Goldman Sachs Bank USA.
Activision is paying $18 in cash per share, which is 20 percent more than King's $14.96 closing price on October 30 at the New York Stock Exchange. King Digital's shares climbed 3.9 percent on Monday to $15.54. The respective boards of directors from both companies unanimously approved the acquisition, which is subject to customary closing conditions and expected to be completed by Spring 2016, according to a joint press release.
The deal is handled by ABS Partners C.V, a wholly-owned subsidiary of Activision Blizzard. Under the terms of the agreement, King will operate as an independent unit under its Chief Executive Officer Riccardo Zacconi, Chief Creative Officer Sebastian Knutsson, and Chief Operating Officer Stephane Kurgan. The two companies will have a combined active monthly users of roughly 550 million across 196 countries.
Furthermore, the combined company has a strong portfolio of over 10 successful game franchises, including Activision Blizzard's Call of Duty, World of Warcraft, Destiny, Guitar Hero, StarCraft, Diablo, Skylanders, Hearthstone: Heroes of Warcraft, and King's Candy Crush Saga, Candy Crush Soda Saga, Farm Heroes, Bubble Witch, and Pet Rescue.
More importantly, the deal will allow Activision to go beyond traditional gaming systems and into the burgeoning mobile games market. Since its debut in 2012, Candy Crush Saga has topped the charts. It is still a popular game on Apple's App Store and Google's Play Store. Roughly 60 percent of King's users are female--a category that Activision has since struggled to attract.
Traditional gaming on game consoles, PCs and Macs withered from $44 billion in 2012 to $50 billion in 2015, while mobile gaming snowballed into a $36 billion market, up from just $12 billion in 2012. Thanks to the increasing popularity of mobile devices, the mobile games market is expected to balloon in 2019, reaching $55 billion, while the traditional games market is set to peak at $57 billion during the same year, according to Activision Blizzard.
“Activision Blizzard will provide King with experience, support and investment to continue to build on their tremendous legacy and reach new potential,” says Bobby Kotick, Chief Executive Officer of Activision Blizzard. “We share an unwavering commitment to attracting and developing the best talent in the business, and we are excited about what we will be able to accomplish together.”
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“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,” says 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.”