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The acquisition of King (Candy Crush) by Activision Blizzard (Call of Duty, World of Warcraft) creates one of the largest entertainment networks in the world with over half a billion monthly active users in 196 countries.
Activision Blizzard, Inc. (“Activision Blizzard”) (Nasdaq: ATVI) and King Digital Entertainment plc (“King”) (NYSE: KING) today announced the signing of a definitive agreement under which ABS Partners C.V. (“ABS Partners”), a wholly owned subsidiary of Activision Blizzard, will acquire all of the outstanding shares of King for $18.00 in cash per share, for a total equity value of $5.9 billion (the “Acquisition”). The $18.00 per share purchase price implies a 20% premium over King’s 30 October 2015 closing price, a 26% premium over King’s 30 October 2015 enterprise value (which excludes net cash), a 23% premium over King’s one month volume weighted average price per share and a 27% premium over King’s three month volume weighted average price per share. The boards of directors of both Activision Blizzard and King unanimously approved the Acquisition, which 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.
One of the Largest Global Entertainment Networks. This Acquisition will create one of the largest global entertainment networks with over half a billion combined monthly active users in 196 countries. This global audience will reach across casual and core gamers, female and male players, and developed and emerging markets throughout the world. Direct relationships with this large and diverse audience will extend Activision Blizzard’s reach, creating opportunities to cross-promote content and engage new players with Activision Blizzard’s franchises.
- A New Global Leader in Mobile Gaming. Through this Acquisition, Activision Blizzard will become a global leader in mobile gaming-the largest and fastest-growing area of interactive entertainment, that is expected to generate over $36 billion of revenue by the end of 2015 and grow cumulatively by over 50% from 2015 to 2019.
- Diverse Franchise Portfolio with Leadership Across Key Platforms and Genres. The combined company will have a portfolio encompassing 10 of the world’s most iconic interactive entertainment franchises with leading titles including two of the top five highest-grossing mobile games in the U.S. (Candy Crush Saga®, Candy Crush Soda Saga™), the world’s most successful console game franchise (Call of Duty®), and the world’s most successful personal computing franchise (World of Warcraft®), among others. This world-class collection of games spans genres and platforms, drives deep, year-round engagement, and is well-positioned for continued growth.
- Potential Cross-Network Growth Opportunities. Combining one of the largest mobile gaming communities with Activision Blizzard’s leading franchises creates potential opportunities to grow and cross-promote content to a diverse audience, while providing players more opportunities to engage with its content.
Enhanced Capabilities Across Business Models. The combined company’s capabilities across subscription, upfront purchase, free-to-play and micro-transaction business models will accelerate diversification of Activision Blizzard’s revenue streams. This expertise across diverse monetization methods will lead to new opportunities to delight players and provide Activision Blizzard with key capabilities to meet evolving player preferences and reach new untapped audiences. The combined company will benefit from King’s leading mobile capabilities that can be applied across the portfolio from micro-transactions, game analytics and mobile marketing to increase digital revenues.
- The Most Profitable, Successful Standalone Interactive Entertainment Company in the World. During the last twelve months Activision Blizzard had non-GAAP revenues of $4.7 billion and King had adjusted revenues of $2.1 billion, and for the same period, adjusted EBITDA of $1.6 billion and $0.9 billion, respectively. The combined company will have further diversified and recurring revenues, cash flow generation, and long-term growth opportunities to propel future value creation for shareholders. Activision Blizzard believes the Acquisition will be accretive to 2016 estimated non-GAAP revenues and earnings per share by approximately 30% and significantly accretive to 2016 estimated free cash flow per share. Activision Blizzard expects the combined company to maintain a disciplined capital allocation policy and strong balance sheet.
- Experienced Management Team. King will continue to be led by Chief Executive Officer Riccardo Zacconi, Chief Creative Officer Sebastian Knutsson, and Chief Operating Officer Stephane Kurgan, all of whom have strong expertise and proven track records in mobile gaming and have entered into long-term employment contracts. It is Activision Blizzard’s intention that King will operate as an independent operating unit, with enhanced resources to support its industry-leading franchises. Activision Blizzard has a strong integration track record, and implementing the Acquisition as structured will minimize disruption and integration risk while maintaining the spirit of creative independence. The combination unites Activision Blizzard’s and King’s highly-complementary cultures, with aligned commitment to innovation, deep respect for the creative process, franchise focus, and emphasis on talent development.
- Under the terms of the Acquisition, which has been unanimously approved by the boards of directors of both companies, King’s shareholders will receive $18.00 in cash per share comprising a total equity value of $5.9 billion and an enterprise value of $5.0 billion. The purchase price represents a 20% premium over King’s closing price on 30 October 2015, a 23% premium over King’s one month volume weighted average price per share, and a 27% premium over King’s three month volume weighted average price per share and implies a multiple of 6.4x King’s estimated 2015 adjusted EBITDA.
- The cash consideration payable by Activision Blizzard under the terms of the Acquisition will be funded from approximately US$3.6 billion of offshore cash on the balance sheet of the Activision Blizzard Group and by an incremental term loan committed by Bank of America Merrill Lynch and Goldman Sachs Bank USA, as incremental lenders, under Activision Blizzard’s existing credit agreement in the amount of US$2.3 billion.
- The King board of directors, who have been so advised by J.P. Morgan as to the financial terms of the Acquisition, consider the terms of the Acquisition to be fair and reasonable. In providing its advice to the King Directors, J.P. Morgan has taken into account the commercial assessments of the King Directors.
- Accordingly, the King Directors unanimously recommended that King’s shareholders vote in favour of the resolutions relating to the Acquisition at the relevant shareholder and scheme meetings.
- It is intended that the Acquisition will be implemented by means of a scheme of arrangement under Chapter 1 of Part 9 of the Irish Companies Act 2014 (the “Scheme”). It is intended that the scheme document, (the “Scheme Document”) containing the full terms and conditions of the Acquisition (including notices of the shareholder and scheme meetings), will be issued to King’s shareholders, and, for information only, to holders of King’s options and share awards, within 28 days of this Announcement, unless otherwise agreed with the Irish Takeover Panel. The Scheme Document will be made available by Activision Blizzard at activisionblizzard.
acquisitionoffer.com and by King at http://investor.king.com/ acquisition.
- The Acquisition will be put to King’s shareholders at both a scheme meeting and a shareholder meeting. In order to become effective, the Scheme must be approved by a majority in number of the King’s shareholders voting at the scheme meeting, either in person or by proxy, representing at least 75% in value of the King shares voted in each relevant share class. In addition, a special resolution implementing the Scheme and approving the related reduction of share capital must be approved by the King shareholders representing at least 75% of votes cast at the shareholder meeting.
- The Acquisition, by means of a Scheme, is conditional, among other things, on the satisfaction or waiver of the conditions set out in Appendix I. The Scheme will also require the sanction of the Irish High Court. Subject to the satisfaction, or where relevant waiver, of all relevant conditions and the sanction of the Irish High Court, it is currently expected that the Scheme will become effective and the Acquisition will be completed by Spring 2016. An expected timetable of principal events will be included in the Scheme Document.
- If the Scheme becomes effective, it will be binding on all King shareholders, irrespective of whether or not they attended and/or voted at the court or shareholder meetings (and if they attended and voted, whether or not they voted in favour).
- Activision Blizzard and ABS Partners have received irrevocable undertakings from Messrs. Riccardo Zacconi, Stephane Kurgan, Sebastian Knutsson, being members of the King Board, that they will vote in favour of the matters and resolutions to be considered at the court and shareholder meetings in their capacity as shareholders (or, in the event that the Acquisition is implemented by way of a takeover offer on terms and conditions at least as favourable, in aggregate, as the Scheme, to accept the offer or procure acceptance of the offer) in respect of their entire beneficial holdings of King shares amounting to, in aggregate, 49,408,045 King shares, representing approximately 16% of the issued share capital of King on 30 October 2015 (being the last practicable date prior to the publication of this Announcement).
- In addition, Activision Blizzard and ABS Partners have received irrevocable undertakings from certain other King Shareholders, namely Bellaria Holding S.à r.l. and Mr. Thomas Hartwig, King’s Chief Technology Officer, that they will vote in favour of the matters and resolutions to be considered at the court and shareholder meetings (or, in the event that the Acquisition is implemented by way of a takeover offer on terms and conditions at least as favourable, in aggregate, as the Scheme, to accept the offer or procure acceptance of the offer) in respect of their entire beneficial holdings of King shares amounting to, in aggregate, 147,107,666 King shares, representing approximately 47% of the issued share capital of King on 30 October 2015 (being the last practicable date prior to the publication of this Announcement).
- In addition, Activision Blizzard and ABS Partners have received irrevocable undertakings from Messrs. Robert Miller, Marcus Jacobs, Tjodolf Sommestad and Nicholas Pointon and Ms. Frances Williams and Jill Kyne, being holders of linked shares, that in their capacity as holders of linked shares they will vote in favour of the matters and resolutions to be considered at the relevant class meetings relating to approval of the Scheme (or, in the event that the Acquisition is implemented by way of a takeover offer on terms and conditions at least as favourable, in aggregate, as the Scheme, to accept the offer or procure acceptance of the offer) in respect of their entire beneficial holdings of linked shares (as applicable) amounting to, in aggregate, 190,790 linked shares which, together with the commitments from Messrs. Zacconi and Kurgan referred to above (which amount to 2,077,080 linked shares in aggregate), represents approximately 92% of the issued linked share capital on 30 October 2015 (being the last practicable date prior to the publication of this Announcement).
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