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How Will the King Digital Acquisition Help Activision?

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Acquisition completed in February 2016

In November 2015, Activision Blizzard (ATVI) announced the signing of a definitive agreement with King Digital Entertainment (KING). ABS Partners, a wholly owned subsidiary of ATVI, will acquire outstanding shares of King Digital for $18 in cash per share. The acquisition was valued at $5.9 billion and was completed in February 2016.

King Digital owns Candy Crush, one of the most successful mobile global franchises. Activision’s acquisition of King Digital should help it penetrate the fast-growing mobile game segment. Activision’s monthly active users (or MAUs) will increase to over 500 million from 80 million with this acquisition.

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Following this acquisition, Activision Blizzard should become a global leader in mobile gaming, which is considered the largest and fastest-growing area of interactive entertainment. Mobile gaming is expected to generate approximately $36 billion in revenue globally by the end of fiscal 2015 and is anticipated to grow by over 50% from 2015 to 2019.

King Digital to operate as an independent unit

According to the Wall Street Journal, Activision will face challenges in growing King Digital “beyond its Candy Crush fame.” After the acquisition, King Digital will operate as an independent unit.

With the King Digital acquisition, Activision Blizzard aims to establish itself as a cross-platform gaming stalwart by integrating its console and PC franchises with King Digital’s strong mobile presence.

Activision accounts for 0.49% of the PowerShares QQQ Trust (QQQ). The other top holdings of this ETF include Apple (AAPL) with an 11.5% weight and Microsoft (MSFT) with an 8.3% weight.

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