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Vivendi purchases majority share in Activision
Wow. Beat Kraig to this.
$20 says that EA responds by trying to up their share of Ubisoft to a controlling share.
Vivendi-Activision deal creates new video game empire - International Herald Tribune
Quote:
SAN FRANCISCO: In a deal that creates the biggest independent video game publisher in the world, Vivendi announced Sunday that it planned to acquire a controlling stake in Activision.
Under the arrangement, Vivendi will pay $1.7 billion in cash and fold its games operations into that of Activision, the companies said. The deal would leave Vivendi with a 68 percent share of the combined company, to be called Activision Blizzard.
Blizzard Entertainment is the name of the most successful game studio in Vivendi's game operations.
Under the deal, Vivendi, based in Paris, will pay $27.50 per share of Activision, a 24 percent premium over Friday's close of $22.15. The companies said the new entity would continue to trade publicly on Nasdaq.
The deal combines companies with different areas of strength in the booming video game business.
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Activision's emphasis is making games for consoles, like the Sony PlayStation 3 and Microsoft's Xbox 360. Its game franchises include the skateboarding game Tony Hawk, the war game Call of Duty, and one of the industry's current best sellers, Guitar Hero, which allows people to strum along on a plastic guitar to tunes played on the television.
Vivendi's strength is in the world of online multiplayer games, such as World of Warcraft, which has more than 9 million players worldwide.
The two companies said that their combined revenue for 2007 would be $3.8 billion. The new entity will best Electronic Arts, with revenue of $3.1 billion, as the largest video game publisher in the world that is not affiliated with a console maker, such as Microsoft or Nintendo.
The two companies said they expect operating income for the new company of $1.1 billion, or $1.20 a share, by 2009 and said it would have the highest profit margins in the industry.
Despite Vivendi's taking the larger stake in the new company, Robert Kotick, chief executive of Activision, will remain as chief executive of the combined companies. Bruce Hack, the chief executive of Vivendi Games, will become vice chairman and chief corporate officer and lead the merger integration.
"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 said Sunday.
In recent years, there have been numerous examples of major publishers buying video game development studios. But the Activision Blizzard merger represents a substantially more significant deal, and one with immense stakes. The video game software industry is booming, and is poised for a record year, driven by the recent introduction of the PlayStation 3, Nintendo Wii, and Xbox 360 game consoles.
But the industry also depends on companies creating hits, and being able to sustain them.
Activision, based in Santa Monica, California, has been an industry darling of late, in large part because of the popularity of Guitar Hero III, the latest iteration of the franchise. It was introduced on Oct. 28, and sold 1.3 million copies within seven days. Through October, Activision has three of the eight best-selling games in the United States this year, according to NPD Group, which compiles sales data.
But even as Activision has been on a roll, industry analysts have questioned whether it can build the kind of library of franchises to compete with Electronic Arts. The addition of Vivendi adds a new wrinkle because it gives Activision access to Vivendi's portfolio of multiplayer games.
Kotick said that because Vivendi also owns Universal Music Group, the transaction "will benefit Guitar Hero and further extend our sizable leadership position in music-based games."
Even as the deal puts Activision Blizzard in the top spot in terms of revenue, the question that will face investors is whether Activision can duplicate the business model of Electronic Arts.
EA has built its business on creating numerous game franchises that deliver reliable streams of annual revenue. For instance, in its fiscal 2007, EA had 24 titles that sold more than 1 million copies each, and four games - Madden NFL 07, Need for Speed Carbon, FIFA 07 and The Sims 2 Pets - that sold more than 5 million copies.
In the merger, shares of Vivendi Games will be converted into 295.3 million new shares of Activision common stock, a transaction that values Vivendi Games at $8.1 billion. Vivendi will also buy 62.9 million newly issued shares of Activision for $1.7 billion in cash.
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Dec 04, 07
