Activision Blizzard Results Top Estimates; To Buy King Digital In $5.9 Bln Deal

(RTTNews) - Activision Blizzard Inc. (ATVI) reported profit for the third-quarter 2015, and raised its 2015 Outlook. It agreed to acquire King Digital Entertainment (KING) for $5.9 billion in equity value or $5.0 billion in enterprise value.

Looking ahead for calendar year 2015, the company now expects GAAP earnings per share to be $1.07, non-GAAP earnings per share of $1.31, GAAP net revenues of $4.530 billion, and non-GAAP Net Revenues of $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.

Previously, the company expected GAAP earnings per share to be $1.06, non-GAAP earnings per share of $1.30, GAAP net revenues of $4.425 billion, and non-GAAP net revenues of $4.600 billion for calendar year 2015.

In addition, Activision Blizzard, Inc. and King Digital Entertainment announced the signing of a definitive agreement under which ABS Partners C.V., 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 $18.00 per share purchase price implies a 20% premium over King's 30 October 2015 closing price.

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 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 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.

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.

King Digital 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.

For the quarter third-quarter ended September 30, 2015, Activision Blizzard's GAAP earnings per share were $0.17, as compared with a loss of $0.03 for the third quarter of 2014. On a non-GAAP basis, the company's earnings per share were $0.21, as compared with $0.23 for the third quarter of 2014. 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 income for the third-quarter was $127 million, compared to a loss of $23 million in the previous year.

Quarterly GAAP net revenues grew to $990 million, from $753 million last year.. On a non-GAAP basis, the company's 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.

At constant FX, non-GAAP revenues were down 4% and earnings per share was up 13% for the quarter versus prior year.