Sunday, December 2nd 2007

Vivendi and Activision to Create Activision Blizzard - World's Largest Game Publisher

Activision and Vivendi today announced that they have signed a definitive agreement to combine Vivendi Games, Vivendi's interactive entertainment business - which includes Blizzard Entertainment's World of Warcraft, the world's #1 multi-player online role-playing game franchise - with Activision, creating the world's largest pure-play online and console game publisher. The new company, Activision Blizzard, is expected to have approximately $3.8 billion in pro forma combined calendar 2007 revenues and the highest operating margins of any major third-party video game publisher. On closing of the transaction, Activision will be renamed Activision Blizzard and will continue to operate as a public company traded on NASDAQ under the ticker ATVI.

Activision, one of the world's leading independent publishers of interactive entertainment, is best known for its top-selling franchises, including Guitar Hero, Call of Duty and the Tony Hawk series, as well as Spider-Man, X-Men, Shrek, James Bond and TRANSFORMERS. Blizzard Entertainment, a division of Vivendi Games, has projected calendar 2007 revenues of $1.1 billion, operating margins of over 40% and approximately $520 million of operating profit. Blizzard owns the #1 multi-player online role-playing game franchise, World of Warcraft, which currently has over 9.3 million subscribers worldwide. Blizzard's World of Warcraft, Warcraft, StarCraft and Diablo games account for four of the top-five best-selling PC game titles of all time. Vivendi Games also owns popular franchises, including Crash Bandicoot and Spyro. Pro forma for calendar 2007, Activision Blizzard expects to generate approximately 70% of its revenues from owned franchises. As a result of the business combination, Activision Blizzard expects to have the most diversified and broadest portfolio of interactive entertainment assets in its industry, positioning the combined company to capitalize on the continued worldwide growth in interactive entertainment.

Jean-Bernard Levy, Chairman of the Management Board and Chief Executive Officer of Vivendi stated: "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. We believe this transaction will create significant value for Activision Blizzard and Vivendi stockholders. In Activision, we have found a partner with a highly complementary business and strong operating team. Bobby Kotick and Brian Kelly are industry pioneers, well known for creating shareholder value. The combined strength of the existing management teams at both companies will set the stage for further profitable growth of Activision Blizzard. We look forward to being an active and supportive majority stockholder in a company that is poised to lead the worldwide interactive entertainment industry in the years ahead."

Rene Penisson, Member of the Management Board of Vivendi and current Chairman of Vivendi Games, added: "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."

Said Robert Kotick, Activision's Chairman and Chief Executive Officer: "This is an outstanding transaction for Activision and our stockholders, as well as a pivotal event in the continuing transformation of the interactive entertainment industry. 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. Activision stockholders will benefit from significantly increased earnings power and the recurring nature and predictability of subscription-based revenues, while also having the opportunity, if they choose, to receive $27.50 per share for a portion of their shares in the post-closing tender offer."

Kotick continued: "Vivendi Games provides Activision with unique strategic and financial benefits and will allow us to leverage our franchises into emerging online opportunities as Blizzard has done so successfully. Activision has been very focused on margin expansion, and this transaction will meaningfully increase our overall operating margins as we expand our franchises online and in new geographies. Diversifying our revenue base among subscription-based online, console and PC formats, as well as wireless and casual emerging opportunities, gives us the broadest platform to capitalize on industry growth. With Blizzard's successful franchises, such as World of Warcraft, StarCraft and an exciting pipeline of yet-to-be announced titles, Vivendi Games' and Blizzard's management team will join with Activision's strong and experienced leaders to become an even more powerful force for innovation in online and offline interactive entertainment across a wide range of platforms. This transaction also provides a unique relationship with Universal Music Group - the world's largest music company - which will benefit Guitar Hero and further extend our sizable leadership position in music-based games."

Mike Morhaime, President and Chief Executive Officer of Blizzard, added: "Blizzard's industry-leading PC games business, with a track record of nine consecutive bestsellers and a global subscriber base of more than 9.3 million World of Warcraft players, is an exceptional fit for Activision's highly profitable console games business. From our interactions with the Activision team, it is clear we have much in common in terms of our approaches to game development and publishing. Above all, we are looking forward to continue creating great games for Blizzard gamers around the world, and we believe this new partnership will help us to do that even better than before."

Structure & Terms of Transaction
Under the terms of the agreement, Vivendi Games will be merged with a wholly owned subsidiary of Activision. In the merger, shares of Vivendi Games will be converted into 295.3 million new shares of Activision common stock. Based on the transaction price of $27.50 per share of Activision common stock, this implies a value of approximately $8.1 billion for Vivendi Games. Concurrently with the merger, Vivendi will purchase 62.9 million newly issued shares of Activision common stock at a price of $27.50 per share - a premium of 31% to Activision's average closing price over the past 20 trading days - for a total of $1.7 billion in cash. As a result of these transactions, Vivendi will own an approximate 52% ownership stake in Activision Blizzard on a fully diluted basis.

Within five business days after closing the transaction, Activision Blizzard will launch a $4 billion all-cash tender offer to purchase up to 146.5 million Activision Blizzard common shares at $27.50 per share. The tender offer will be funded by Activision Blizzard's cash on hand at closing, including the $1.7 billion in cash received from the Vivendi share purchase. In addition, Vivendi has 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, the proceeds of which would also be used to fund the tender offer. Any remaining funds required to complete the tender offer will be borrowed by Activision Blizzard from Vivendi or third-party lenders. If the tender offer is fully subscribed, Vivendi will own an approximate 68% ownership stake in Activision Blizzard on a fully diluted basis.

The transaction is expected to be immediately accretive in its first year post-closing for Activision's stockholders and slightly accretive for Vivendi's stockholders. Activision Blizzard is targeting pro forma operating income of $1.1 billion and pro forma earnings per share (EPS) in excess of $1.20 in calendar year 2009. The transaction is expected to be at least $0.20 accretive to Activision stockholders in calendar year 2009.Source: Activision
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24 Comments on Vivendi and Activision to Create Activision Blizzard - World's Largest Game Publisher

#1
robodude666
@#$%

If Activision KILLS ANY of Blizzard's games I will go over to the Activision office and kill them all! I am a very big fan of Blizzard's games and they are some of the first games I have played and became addicted to. I will be very upset if Activision kills any of Blizzard's series!

-robodude666
Posted on Reply
#2
ktr
by: robodude666
@#$%

If Activision KILLS ANY of Blizzard's games I will go over to the Activision office and kill them all! I am a very big fan of Blizzard's games and they are some of the first games I have played and became addicted to. I will be very upset if Activision kills any of Blizzard's series!

-robodude666
Keyword is publisher...not developer.
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#3
Ravenas
by: ktr
Keyword is publisher...not developer.
The publisher has a lot to do with the developer, so publishers do matter in developing. However, I don't think Activison will ruin Blizzard games, only because Blizzard is such a good developer that Activison will let them take as long as Blizzard deems necessary.
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#4
Basard
This is going to bring us Diablo 3 faster, right? :D
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#5
yogurt_21
by: robodude666
@#$%

If Activision KILLS ANY of Blizzard's games I will go over to the Activision office and kill them all! I am a very big fan of Blizzard's games and they are some of the first games I have played and became addicted to. I will be very upset if Activision kills any of Blizzard's series!

-robodude666
couldn't agree more.
Posted on Reply
#6
yogurt_21
by: Basard
This is going to bring us Diablo 3 faster, right? :D
wrong, this might just kill diablo 3 alltogether, activision isn't a company you want tied to blizzard.
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#7
Ravenas
by: Basard
This is going to bring us Diablo 3 faster, right? :D
If anything, this will be something that provides more publishing funds and development funds for Diablo 3. There is already a small team of secret developers working on an unknown product inside Blizzard, many believe that this team is working on Diablo 3.
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#8
ktr
by: Ravenas
The publisher has a lot to do with the developer, so publishers do matter in developing. However, I don't think Activison will ruin Blizzard games, only because Blizzard is such a good developer that Activison will let them take as long as Blizzard deems necessary.
I blame that incompetent developer that need their power house publisher to finish/polish up their product.
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#9
imperialreign
at least they're not being aquired by EA

if that were the case, all their projects would go to the toilet
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#10
F-22
by: ktr
Keyword is publisher...not developer.
So you're trying to convince us that publishers cannot adverseley affect game developers / games? If that's what you believe, you're 100% wrong.

by: imperialreign
at least they're not being aquired by EA

if that were the case, all their projects would go to the toilet
AMEN Brother!!!! We gotta look at the bright side!
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#11
Basard
How could they NOT be working on it? Why wouldn't they, they've got to be.
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#12
Ravenas
by: F-22
So you're trying to convince us that publishers cannot adverseley affect game developers / games? If that's what you believe, you're 100% wrong.
I completely agree. Publishers are the ones with all the money, and they will make sure they are getting the product they want (because remember, it's the publisher's money).
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#13
JC316
Knows what makes you tick
I don't like this whole EA/Vivendi owning the entire video game world. I like Vivendi better than EA, but this seems like bad news to me. Pretty soon, it will be EA and Vivendi buying up all of the smaller companies until they are the only two left.
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#14
Ravenas
by: JC316
I don't like this whole EA/Vivendi owning the entire video game world. I like Vivendi better than EA, but this seems like bad news to me. Pretty soon, it will be EA and Vivendi buying up all of the smaller companies until they are the only two left.
Still have the Asian publishers to consider though.
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#15
effmaster
by: Ravenas
Still have the Asian publishers to consider though.
Which could easily be bought out as well. I wouldnt be surprised if MGS (Microsoft Game Studios) were to buy out Namco Bandai in order to have a greater presence in the asian market
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#16
imperialreign
Hey, as long as certain developer groups exist (ID Software, for example), the publishers/distributors have their hands full. Those software companies tend to be free-lance and go with whoever for their release, and if a publisher doesn't want to meet their demands, they go elsewhere. Devs like ID have a massive fan following, which means a ton of buying power and publishers don't exactly want to give that up when it could mean big profits, y'know? ID has stayed with Activision for the most part, same with their butt-buddies Raven Software, but that wouldn't stop them from going elsewhere if they wanted.

It's all the up and coming game devs that get snarred in by the big-pub contracts, and I think that really hurts the small companies trying to make a name for themselves. Quickest I can think off the top of my head that was highly influential, but, IMO was killed off by a publisher was Looking Glass Studios. I really think it was Eidos' iron grip on their titles that brought LGS under.
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#17
Silverel
Maybe, just maybe, they'll give the Blizz crew a damn fine slap across the head and force them into some new IP. I'd love to see more original content outside of the War/Starcraft and Diablo series. Blizzard is an excellent company for the work they've done. Amazing really, but at this point I think focusing on the same IP for so long is gonna make em stale.

I dream of higher potential, fresh concepts, and less rehashing. Character models from WC3 turned into WoW. SC was rehashed into SC2, and Ghost was never released for some stupid reason. Diablo, well, the whole point+click hacking interface... yeah.

On top of all that, did they really need to merge at all? Aren't they the most profitable company in the history of gaming? I think this is more a move to get in comfy with activision, and buy them out.
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#18
Darkrealms
I think Blizzard is doing fine. Remember how long they were developing SC3 and WoW before they talked about them. Blizzard takes their time and does things RIGHT.
Every game Blizzard has made has been on top*. If Activision is stupid enough to do anythng but throw money at them, there will be plenty of people willing to block their doors and burn them to the ground.

*I know WC I was average (but hey it was their first game).

by: Silverel
On top of all that, did they really need to merge at all? Aren't they the most profitable company in the history of gaming? I think this is more a move to get in comfy with activision, and buy them out.
Why would they want to take on the project of making Activision better? LoL
Posted on Reply
#20
Ravenas
by: effmaster
Which could easily be bought out as well. I wouldnt be surprised if MGS (Microsoft Game Studios) were to buy out Namco Bandai in order to have a greater presence in the asian market
I highly doubt that would ever happen. Microsoft normally buys medium to small developers and then funds that developer out the a** to get the quality and "fun" they expect out of their products.
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#21
Irish_PXzyan
Hey guys.

I am just wondering..when Activision release a new title..will the logo change and will it be called Activision Blizzard??

iam not aware what is really going on!...why has so much money been spent on this?? what will change???
Will this mean more games??
Or does it mean that the name Blizzard will feature in more games??

What is the big picture with this deal?
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#22
robodude666
by: Irish_PXzyan
What is the big picture with this deal?
Activision gets even more money.
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#23
Irish_PXzyan
oh!....seems pointless then..why would Blizzard hand them moneyz for nothing :p
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#24
Darkrealms
by: Irish_PXzyan
oh!....seems pointless then..why would Blizzard hand them moneyz for nothing :p
Because if Activision is smart they will be handing Blizzard lots of funding dollars for development :)
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