By Lisa Kerner
Charlotte, N.C., Dec. 3 - Vivendi subsidiary Vivendi Games will combine with Activision Inc. in an $18.9 billion transaction to create Activision Blizzard, "the world's largest pure-play online and console game publisher," a news release stated.
The deal calls for Vivendi to purchase 62.9 million newly issued shares of Activision common stock for $27.50 each, or $1.7 billion, in cash for a controlling interest in the company. The per-share price is a 31% premium to Activision's average closing price over the past 20 trading days.
Vivendi Games will merge with a wholly owned subsidiary of Activision. Shares of Vivendi Games will be converted into 295.3 million new shares of Activision common stock for some $8.1 billion based on the transaction price of $27.50 per Activision share.
The transaction is expected to close in the first half of 2008.
Vivendi Games, Vivendi's interactive entertainment business, includes Blizzard Entertainment's World of Warcraft, one of the world's largest multi-player online role-playing game franchises. Blizzard Entertainment is a division of Vivendi Games. Activision is known for its top-selling franchises including Guitar Hero and Call of Duty.
Following the transaction's close, Activision Blizzard will launch a $4 billion all-cash tender offer to purchase up to 146.5 million Activision Blizzard shares at $27.50 per share.
Vivendi agreed to acquire from Activision Blizzard additional newly issued shares for up to an additional $700 million of Activision common stock at $27.50 per share.
Activision Blizzard estimates pro forma operating income of $1.1 billion and pro forma earnings per share in excess of $1.20 in calendar year 2009. The company will trade on Nasdaq under the ticker symbol "ATVI."
The new company will be led by president and chief executive officer Robert Kotick, currently chairman and CEO of Activision. Bruce Hack, current Vivendi Games CEO, will be vice-chairman and chief corporate officer of Activision Blizzard. Mike Morhaime will remain in his role as president and CEO of Blizzard Entertainment.
Activision Blizzard's 11-member board of directors will include six directors designated by Vivendi, two Activision management directors and three independent directors who are currently members of Activision's board. Vivendi Games chairman René Penisson will become chairman of Activision Blizzard. Brian Kelly, currently co-chairman of Activision, will be co-chairman of Activision Blizzard.
In addition to Kotick and Hack, other Activision Blizzard directors will include Vivendi CEO Jean-Bernard Lévy, Universal Music Group CEO Doug Morris, Vivendi chief financial officer Philippe Capron and Vivendi senior vice president Frédéric Crépin.
"By combining leaders in mass-market entertainment and subscription-based online games, Activision Blizzard will be the only publisher with leading market positions across all categories of the rapidly growing interactive entertainment software industry and reach the broadest possible audiences," Kotick said in the release.
"By joining forces with Vivendi Games, we will become the immediate leader in the highly profitable online games business and gain a large footprint in the rapidly growing Asian markets, including China and Korea, while maintaining our leading operating performance across North America and Europe," Kotick added.
Kotick also noted that the transaction provides a relationship with Universal Music Group, which will benefit the Guitar Hero franchise and "further extend our sizable leadership position in music-based games."
Activision was advised by Allen & Co. LLC and Skadden, Arps, Slate, Meagher & Flom LLP. Vivendi was advised by Goldman, Sachs & Co. and Gibson, Dunn & Crutcher LLP.
Vivendi is a digital entertainment company based in Paris. Vivendi Games is a leader in the subscription-based massively multi-player online role-playing games category.
Activision develops, publishes and distributes interactive entertainment and leisure products. The company is located in Santa Monica, Calif.
| Acquirer: | Vivendi
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| Target: | Activision Inc.
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| Announcement date: | Dec. 2
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| Transaction total: | $18.9 billion
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| Price per share: | $27.50
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| Expected closing: | First half of 2008
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| Stock price of target: | Nasdaq: ATVI: $22.15 on Nov. 30
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