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OPINIONS

Vivendi Games and Activision Merger
By: Barzan "Tony" Antal
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    2008-03-12

    Table of Contents:
  • Vivendi Games and Activision Merger
  • Introducing Vivendi and Activision
  • Let’s Talk Business
  • Our Analysis
  • Closing Thoughts

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    Vivendi Games and Activision Merger - Let’s Talk Business


    (Page 3 of 5 )

    The announcement of this fusion went public on December 2, 2007. It is valued at a total of $18.9 billion. Once this mega-merger is completed, Activision will be known as Activision Blizzard; moreover, Vivendi Games will take a part of this newly formed company as a subsidiary.

    “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.

    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.”

                                                          —Robert Kotick, Chairman and CEO of Activision.

    In business, subsidiary means that the entity is controlled by a larger entity. In our case, that’s Activision Blizzard. However, Vivendi, the Paris-based company, ought to have approximately 52% of Activision Blizzard stakes, meaning that they will hold the majority.

     “This alliance is a major strategic step for Vivendi and is another illustration of our drive to extend our presence in the entertainment sector. By combining Vivendi’s games business with Activision, we are creating a worldwide leader in a high-growth industry. We are excited about the opportunities for Activision Blizzard as a broader entertainment software platform.”

                                                                            —Jean-Bernard Lévy, CEO of Vivendi.

    (Photo courtesy of afjv - Agence Française pour le Jeu Vidéo)

    The whole transaction isn't supposed to finalize until Q2-Q3 of 2008 and it contains two main phases. The first one implies the following terms: Vivendi contributes, with Vivendi Games, $8.1 billion in shares and an additional $1.7 billion in cash. The completion of this transaction stands for a 52% stake in Activision Blizzard.

     “We are very confident that by combining forces, Activision Blizzard will set the highest standards in quality, reputation and profitability, and will bring together the best creative teams in the industry. The combination of this unique product portfolio with highly professional employees gives us great confidence in the growth prospects for Activision Blizzard.”

                                                          —René Penisson, Chairman of Vivendi Games.

    The second phase is a so-called “post-closing” one. It’s about offering 146.5 million Activision Blizzard shares at a price of $27.50 per share. This comes to a total of $4 billion (146.5 x 27.50) and represents a 31% premium for Activision stockholders calculated on the 20-trading-day average prior to this deal.

    This should increase Vivendi's stake to 66%. Moreover, it has been said that Vivendi also plans to purchase shares worth a total of $700 million. This would put their majority stake percentage at 68% ownership (depends on the results of the tender offer). The shares get divided respectively between the board of directors.

    Six representatives were selected by Vivendi alongside two members from Activision and three other independent directors to constitute the Board of Directors of Activision Blizzard. It’s worth pointing out that all of those independent directors are currently working for Activision. All in all, the ratio was 5:4 – the majority is maintained by Vivendi.

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