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Activision Buys Vivendi In $8.17 Billion Deal

By Mani
Updated on

Activision Blizzard, Inc. (NASDAQ:ATVI) is set to buy back about 429 million shares from Vivendi SA (EPA:VIV) (OTCMKTS:VIVHY) in an $8.17 billion deal, ending months of uncertainty.

Activision Buys Vivendi In $8.17 Billion Deal

Activision Blizzard, Inc. (NASDAQ:ATVI) acquired a controlling stake in Vivendi SA (EPA:VIV) (OTCMKTS:VIVHY) through buying back 429 million shares for $5.83 billion or $13.60 per share, a 10 percent discount to Thursday’s share price.

Activision’s chief executive officer Bobby Kotick and his partners, including Chinese video-game publisher Brian Kelly of Tencent Holdings Ltd (HKG:0700) (OTCMKTS:TCTZF) set up an investment vehicle ASAC II LP, to which Kotick and Kelly contributed $100 million of their own money. The investment vehicle will purchase 172 million shares for $2.34 billion, pegging the total deal size at $8.17 billion.

Activision Blizzard, Inc. (NASDAQ:ATVI) chief executive officer Robert Kotick’s compensation jumped almost eight times last year, catapulting him into the top four among Bloomberg’s ‘Compensation King List’.

Vivendi to hold just 12 percent

Once the deal is concluded, Vivendi’s stake in Activision would be reduced to approximately 83 million shares, or about 12 percent of the game publisher. Vivendi SA (EPA:VIV) (OTCMKTS:VIVHY) pledged to retain its shares in a staggered 15-month lock up.

The investing public would hold the majority of shares in Santa Monica, Calif-based Activision.

Activision Blizzard, Inc. (NASDAQ:ATVI) publishes online, personal computer (PC), console, handheld, and mobile interactive entertainment products worldwide. It operates in three segments: Activision, Blizzard, and Distribution.

Debt financing option for Activision

Activision Blizzard, Inc. (NASDAQ:ATVI), best known for its Call of Duty war-simulation games and World of Warcraft online fantasy franchise, had $4.3 billion in cash and cash equivalents at the end of March. The publisher said it would fund the purchase with $1.2 billion in cash on hand from its domestic accounts and approximately $4.6 billion in debt financing from banks including JPMorgan Chase & Co. (NYSE:JPM) and Bank of America Merrill Lynch.

Cliff Edwards and Marie Mawad of Bloomberg, citing Michael Pachter, a Wedbush Securities analyst, indicated the deal avoids a tender offer to purchase all outstanding shares. With $50 million each contributed by Kotick and Kelly, Activision will be required to take on less debt.

J.P. Morgan Securities LLC and law firm Skadden, Arps, Slate, Meagher & Flom LLP advised Activision on the deal.

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