July 28, 2013
Activision Blizzard Announces Plans To Split From Vivendi
redOrbit Staff & Wire Reports - Your Universe Online
Activision Blizzard, producers of the popular "World of Warcraft," "Call of Duty" and "Skylanders" video game series, has announced they will be parting ways with French media conglomerate Vivendi after agreeing to buy back the majority stake held by its parent company for a reported $8.2 billion.
According to AP Technology Writer Barbara Ortutay, 429 million shares will be sold back to Activision itself at a total cost of $5.83 billion, while another 172 million shares will be sold to a consortium of investors headed up by Activision CEO Bobby Kotick and co-chairman Brian Kelly for $2.34 billion.
Kotick and Kelly are each contributing $100 million of their own money towards the consortium, Ortutay said. The transaction will reduce Vivendi's stake in Activision to just 12 percent, or 83 million shares. The sale is expected to close in September, meaning Activision will be an independent company in time for the holiday season.
"These transactions together represent a tremendous opportunity for Activision Blizzard and all its shareholders, including Vivendi," Kotick said in a statement, according to Sophie Curtis of The Telegraph.
"We should emerge even stronger - an independent company with a best-in-class franchise portfolio and the focus and flexibility to drive long-term shareholder value and expand our leadership position as one of the world's most important entertainment companies," he added. Kotick also noted the transactions would allow Activision to retain "more than $3 billion cash on hand to preserve financial stability."
The merger between Vivendi, Activision and Blizzard Entertainment was first announced in December 2007, and according to Keith Stuart of The Guardian, it was worth $18.9 billion. The result was Activision Blizzard, which is currently the third-largest video game publisher in the world and enjoyed record revenues of $4.86 billion in 2012.
However, Vivendi has recently been working to reduce its debt, which is said to be in the neighborhood of $17 billion. Stuart notes the French media giant is currently in negotiations to sell off shares of African phone operator Maroc Telecom to Etisalat for $5.5 billion. It is expected Vivendi representatives currently serving on the Activision board of directors, including current chairman Philippe Capron, will step down upon the sale's completion.
Joining Kelly and Kotick in the consortium will be Fidelity Investments and Chinese web portal Tencent, which Reuters reports will be a passive investor and will not be gaining a seat on the Activision board. The deal will be financed by Bank of America, Merrill Lynch and JPMorgan, company officials told the news organization.
"With independence, Activision Blizzard will have more control over its strategic direction and use of cash," Piers Harding-Rolls, Head of Games at analysts IHS Electronics & Media, told Curtis. "Although the company is well known for taking deliberate and meaningful steps into established market opportunities, independence may allow it to become more aggressive in its approach to emerging markets and segments."
While Reuters reports Activision did not announce their future plans, their move to break free of Vivendi comes as both Sony and Microsoft are preparing to release the next generation of their PlayStation and Xbox gaming consoles this winter, Curtis said. "Activision's 'Call of Duty: Ghosts' is likely to do well on the machines, as is next year's sci-fi adventure Destiny, a new title from the studio behind the Halo series," she added.