Blizzard 2015 Annual Report Download - page 92

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74
The following net assets were recognized resulting from the acquisitions:
December 22,
2015
Net tangible assets ................................................................................................................
$ 1
Definite-lived intangible assets .............................................................................................
33
Goodwill ...............................................................................................................................
12
Total net assets recognized ................................................................................................
$ 46
Pro forma financial information has not been presented as the acquisition did not have a material impact on our consolidated financial
statements for 2015.
24. Subsequent Events
The King Acquisition
On November 2, 2015, we and King entered into a Transaction Agreement under the terms of which we would acquire King and King
would become a wholly-owned subsidiary of the Company. On February 23, 2016 we completed the King Acquisition under the terms
of the Transaction Agreement. We transferred $5.9 billion in consideration to the existing King shareholders and share-based award
holders.
The Company made this acquisition because it believes that the addition of King’s highly-complementary mobile business will
position the Company as a global leader in interactive entertainment across mobile, console and PC platforms, and positions the
company for future growth. The combined company has a world-class interactive entertainment portfolio of top-performing
franchises.
As the closing of the King Acquisition occurred subsequent to December 31, 2015, our financial results as of and for the year ended
December 31, 2015 do not contain the results of King.
The purchase price, including replacement share awards, is made up of the net assets acquired, including tangible assets, trademark,
franchises, developed technology, other intangibles, and goodwill. A portion of the goodwill associated with this purchase is expected
to be deductible for U.S. income tax purposes. Due to the timing of the close of the King Acquisition, we did not have sufficient time
to complete the valuation of the acquired assets and assumed liabilities, and therefore, the purchase price allocation and amount of
goodwill and the tax deduction cannot be determined at this time. Additionally, supplemental pro forma information has not been
provided for King as due to the timing of the closing of the King Acquisition, compilation of such data is impracticable.
Credit Facilities
Tranche A Term Loan In connection with the closing of the King Acquisition, the Company was provided with incremental term
loans, in the form of Tranche A Term Loans, in an aggregate principal amount of approximately $2.3 billion, of which the proceeds
were used to fund the King Acquisition.
The Tranche A Term Loans are scheduled to mature on October 11, 2020 and bear interest, at the Company’s option, at either (a) a
base rate equal to the highest of (i) the federal funds rate, plus 0.5%, (ii) the prime commercial lending rate of Bank of America, N.A.
and (iii) the LIBOR for an interest period of one month beginning on such day plus 1.00%, or (b) LIBOR, in each case, plus an
applicable interest margin. LIBOR is subject to a floor of 0% and the base rate is subject to an effective floor of 1.00%. The applicable
interest margin for Tranche A Term Loans ranges from 1.50% to 2.25% for LIBOR borrowings and from 0.50% to 1.25% for base
rate borrowings and is determined by reference to a pricing grid based on the Company’s Consolidated Total Net Debt Ratio (as
defined in the Credit Agreement).
The Tranche A Term Loans require quarterly principal payments of 0.625% of the stated principal amount of the Tranche A Term
Loans, with increases to 1.250% starting on June 30, 2019 and 3.125% starting on June 30, 2020, with the remaining balance payable
on the Tranche A Term Loans’ scheduled maturity date of October 11, 2020. Voluntary prepayments of the Tranche A Term Loans
are permitted at any time, in minimum principal amounts, without premium or penalty.
The Tranche A Term Loans are subject to a financial maintenance covenant requiring the Company to maintain a maximum
Consolidated Total Net Debt Ratio (as defined in the Credit Agreement) of 4.00 to 1.00, which will decrease to 3.50 to 1.00 (I) after
the sixth full fiscal quarter after the Tranche A Term Loans are made or (II) if the Collateral Suspension occurs prior to the date falling
18 months after the Tranche A Term Loans are made, on the later of (x) the last day of the fourth full fiscal quarter after the Tranche A
Term Loans are made and (y) the last day of the fiscal quarter in which the Collateral Suspension occurs.
10-K Activision_Master_032416_PrinterMarksAdded.pdf 74 3/24/16 11:00 PM