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Activision Blizzard to Acquire King Digital Entertainment: A Leader

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Activision share price rises 3.6% on acquisition news

On November 2, 2015, Activision Blizzard (ATVI) announced the signing of a definitive agreement with King Digital Entertainment (KING) under which ABS Partners, a wholly owned subsidiary of ATVI, will acquire outstanding shares of King for $18 in cash per share. The acquisition is valued at $5.9 billion. The $18 per share implies a 20% premium over King’s closing price on October 30, 2015, a 26% premium over King’s enterprise value on October 30, 2015, a 23% premium over the firm’s one-month volume-weighted average price per share, and a 27% premium over King’s three-month volume-weighted average price per share.

Activision’s share price rose 3.62% to $35.82, whereas King Digital shares rose 14.80% to $17.84 on November 3, 2015.

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Acquisition unanimously approved by board of directors

The acquisition was approved unanimously by both companies’ boards of directors. As a press release stated, the acquisition “is being implemented by means of a scheme of arrangement under Irish law. The Acquisition is subject to approval by King’s shareholders and the Irish High Court, clearances by the relevant antitrust authorities and other customary closing conditions, and it is currently expected that the Acquisition will be completed by Spring 2016.”

Gerhard Florin, chairman of King’s board of directors, said, “The Acquisition provides a return to King shareholders through the premium that it provides to King’s share price and the immediate liquidity that the Acquisition will provide to all of our shareholders upon completion. The King board of directors believes that Activision Blizzard’s cash offer is attractive given the balance of future opportunities, risks and competitive forces confronting King’s business.”

Activision comprises 0.49% of the PowerShares QQQ Trust (QQQ) and 0.39% of the iShares S&P GSTI (TM) Technology ETF (IGM). Electronic Arts (EA), another firm in the home entertainment space, comprises 0.36% of QQQ.

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