How the King Acquisition Provides Value to Activision Stakeholders
What's Driving Activision Blizzard's Growth?
King Digital acquisition helped Activision to gain online presence
At the end of 1Q16, Activision’s (ATVI) audience grew to 544 million monthly active users (or MAU) driven by the acquisition of King Digital (KING). With the closing of this deal, Activision massively expanded its audience. King brought a diverse network of 463 million global players to the Activision Blizzard family.
Value creation for stakeholders
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Shareholders: The combined company is expected to be a market leader in the interactive entertainment space. According to Activision, this acquisition will be accretive to 2016 estimated non-GAAP revenues and EPS (earnings per share) by 30% and significantly accretive to 2016 estimated free cash flow per share. It also ensures long-term growth opportunities across platforms, genres, and audiences with the ability to expand into untapped areas such as Asia.
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Employees: The company’s employees will have access to enhanced resources. Long-term continuity of the management team should help employees and the company enhance value creation opportunities.
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Customers: The combined entity will provide gamers with new content on the platform of their choice. Activision has also stated that it will continuously look to invest in resources for game development and enhancing user experience. The company aims to introduce new and engaging content across devices.
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Debtholders: An increased scale of operations, diversification of the gaming portfolio, and recurring revenue streams should enhance the company’s stability.
Activision has a market cap of $28.6 billion. Among its peers in the gaming space, Electronic Arts (EA), Zynga (ZNGA), and Take-Two Interactive (TTWO) have market caps of ~$23.3 billion, ~$2.2 billion, and ~$3.2 billion, respectively. Japan’s (EWJ) Sony (SNE) has a market cap of $31.9 billion.
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