Apax poised for King exit with $5.9bn Activision deal

Greg Gille
03 November 2015

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King Digital Entertainment, a listed video game publisher backed by Apax Partners, will be wholly acquired by Activision Blizzard in a $5.9bn deal.

Activision Blizzard, a US video game publisher behind several popular products such as the Call of Duty series and World of Warcraft, has offered to buy all outstanding King shares for $18 apiece. This represents a 27% premium over King's three-month volume-weighted average price per share, but remains below the $22.50 share price set for the company's IPO in March last year.

The deal values King at 6.4x its estimated 2015 EBITDA and has been approved by the boards of both companies. It is expected to complete in Q2 next year, once shareholder and regulatory approval is secured.

Activision Blizzard will finance the deal with $3.6bn in cash from its balance sheet and a $2.3bn incremental loan from Bank of America Merrill Lynch and Goldman Sachs.

Previous funding
Apax backed King in September 2005 when the company was called Midasplayer – it changed its name to King the following November. According to unquote" data, Apax and Index Ventures invested a combined €34m in the business in exchange for minority stakes, with Apax investing €29m. This marked one of Apax's last early-stage investments prior to the firm focusing solely on larger transactions.

King announced its intention to float in February 2014 with JP Morgan, Credit Suisse and Bank of America Merrill Lynch appointed as lead underwriters. The company eventually listed in March. The initial price was set at $22.50 a share, valuing the company at $7bn, but shares closed on $19 on the first day of trading, giving a market cap of less than $6bn. King was trading at $15 prior to the Activision deal announcement.

Apax remained invested in the business following the 2014 flotation and held a 45% stake prior to the Activision deal. The GP is set to reap a 93x multiple on its investment, equating to a 55% IRR – this includes previous proceeds of €418m received from the investment.

Company
Established in 2003, King publishes video games and is best known for its Candy Crush Saga title. The company focuses on casual games available on mobile platforms and available on a freemium model, whereby users can play the game for free but need to pay for additional features.

In its most recent financial year, King posted revenues of $2.1bn with EBITDA of $900m.

People
Bobby Kotick is CEO of Activision Blizzard. Riccardo Zacconi is CEO of King.