Vivendi and Activision Form Activision Blizzard
First order of business: taking over the world.
Published: December 3, 2007
From the files "holy crap, didn't see this one coming" comes a Sunday announcement that will rock the very foundations of the games industry. That's only minor hyperbole, honestly; Vivendi by way of a 52% stake in the new company, will pool the entire Vivendi Games business into a merger with Activision, effectively swallowing up the #2 publisher and creating... der uberpublisher with combined revenues estimated to be $3.8 billion (with a B, kids) in fiscal 2007 alone.
While Vivendi Games isn't exactly a huge name in games, Blizzard Entertainment most certainly is, which explains why they went with the whole Activision Blizzard moniker. World of Warcraft and it's 9.3 million paying customers each month single-handedly brought Vivendi back from the brink; just a few years ago, there were near-constant rumors that the games wing of the French giant was on the chopping block, but thanks to WoW, they've just gobbled up Activision, themselves a bit of a comeback kid thanks in no small part to Guitar Hero (not to mention eleventy billion licensed games in a deal with DreamWorks.
The terms of the merger are complicated, but here's the gist: Activision Blizzard will retain the ATVI ticker symbol that Activision previously held, and Vivendi Games' shares will be converted into 295.3 million shares of Activision common stock, the value of which is estimated to be just over $8 billion. On top of that, Vivendi will buy a whopping 62.9 million shares of the old Activision stock for $27.50 (more than 30% more than Activision stock is currently going for) pumping a massive $1.7 billion in cash into the new endeavor. The new company will then buy back 146.5 million shares of the stock using the cash plus another $700 million from Vivendi, borrow from lenders or from Vivendi proper, eventually closing out a $4 billion buyback.
In short, there's going to be a ton of money flying around over the next few months. The new Board of Directors will be eleven strong -- six from Vivendi, two from Activision and another three independents that currently serve on Activision's board. Want names? Hookay, enjoy:
"René Penisson, currently a member of the Management Board of Vivendi and Chairman of Vivendi Games, will serve as Chairman of Activision Blizzard. Brian Kelly, currently Co-Chairman of Activision, will serve as Co-Chairman of Activision Blizzard. The three independent directors will be Richard Sarnoff, Robert J. Corti and Robert Morgado. Other Activision Blizzard directors will be Robert Kotick (President and Chief Executive Officer of Activision Blizzard), Bruce Hack (Vice-Chairman and Chief Corporate Officer of Activision Blizzard), Jean-Bernard Lévy (Chairman of the Management Board and Chief Executive Officer of Vivendi), Doug Morris (Chairman and Chief Executive Officer of the Universal Music Group), Philippe Capron (Member of the Management Board and Chief Financial Officer of Vivendi), and Frédéric Crépin (Senior Vice President, Head of Legal, Vivendi)."
Mooooore names, you say?
"Robert Kotick will be President and Chief Executive Officer of Activision Blizzard. Bruce Hack, current Chief Executive Officer of Vivendi Games, will serve as Vice-Chairman and Chief Corporate Officer of Activision Blizzard, accountable for leading the merger integration and the finance, human resources and legal functions. Mike Griffith will serve as President and Chief Executive Officer of Activision Publishing, which after closing will include the Sierra Entertainment, Sierra Online and Vivendi Games Mobile divisions in addition to the Activision business. Mike Morhaime will continue to serve as President and Chief Executive Officer of Blizzard Entertainment. Thomas Tippl, currently Chief Financial Officer of Activision, will be appointed Chief Financial Officer of Activision Blizzard and Jean-François Grollemund, currently Chief Financial Officer of Vivendi Games, will be appointed Chief Accounting Officer of Activision Blizzard."
Not surprisingly, there are plenty of very rich people that have some things to say about this.
Jean-Bernard Lévy, Chairman of the Management Board and Chief Executive Officer of Vivendi kicked things off: “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.”
René Penisson, Member of the Management Board of Vivendi and current Chairman of Vivendi Games, then jumped in: “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.”
Next up, 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.
“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.”
Finally, Mike Morhaime, President and Chief Executive Officer of Blizzard, finished off the love-in: "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.”
So, um, holy crap, didn't see this one coming.
While Vivendi Games isn't exactly a huge name in games, Blizzard Entertainment most certainly is, which explains why they went with the whole Activision Blizzard moniker. World of Warcraft and it's 9.3 million paying customers each month single-handedly brought Vivendi back from the brink; just a few years ago, there were near-constant rumors that the games wing of the French giant was on the chopping block, but thanks to WoW, they've just gobbled up Activision, themselves a bit of a comeback kid thanks in no small part to Guitar Hero (not to mention eleventy billion licensed games in a deal with DreamWorks.
The terms of the merger are complicated, but here's the gist: Activision Blizzard will retain the ATVI ticker symbol that Activision previously held, and Vivendi Games' shares will be converted into 295.3 million shares of Activision common stock, the value of which is estimated to be just over $8 billion. On top of that, Vivendi will buy a whopping 62.9 million shares of the old Activision stock for $27.50 (more than 30% more than Activision stock is currently going for) pumping a massive $1.7 billion in cash into the new endeavor. The new company will then buy back 146.5 million shares of the stock using the cash plus another $700 million from Vivendi, borrow from lenders or from Vivendi proper, eventually closing out a $4 billion buyback.
In short, there's going to be a ton of money flying around over the next few months. The new Board of Directors will be eleven strong -- six from Vivendi, two from Activision and another three independents that currently serve on Activision's board. Want names? Hookay, enjoy:
"René Penisson, currently a member of the Management Board of Vivendi and Chairman of Vivendi Games, will serve as Chairman of Activision Blizzard. Brian Kelly, currently Co-Chairman of Activision, will serve as Co-Chairman of Activision Blizzard. The three independent directors will be Richard Sarnoff, Robert J. Corti and Robert Morgado. Other Activision Blizzard directors will be Robert Kotick (President and Chief Executive Officer of Activision Blizzard), Bruce Hack (Vice-Chairman and Chief Corporate Officer of Activision Blizzard), Jean-Bernard Lévy (Chairman of the Management Board and Chief Executive Officer of Vivendi), Doug Morris (Chairman and Chief Executive Officer of the Universal Music Group), Philippe Capron (Member of the Management Board and Chief Financial Officer of Vivendi), and Frédéric Crépin (Senior Vice President, Head of Legal, Vivendi)."
Mooooore names, you say?
"Robert Kotick will be President and Chief Executive Officer of Activision Blizzard. Bruce Hack, current Chief Executive Officer of Vivendi Games, will serve as Vice-Chairman and Chief Corporate Officer of Activision Blizzard, accountable for leading the merger integration and the finance, human resources and legal functions. Mike Griffith will serve as President and Chief Executive Officer of Activision Publishing, which after closing will include the Sierra Entertainment, Sierra Online and Vivendi Games Mobile divisions in addition to the Activision business. Mike Morhaime will continue to serve as President and Chief Executive Officer of Blizzard Entertainment. Thomas Tippl, currently Chief Financial Officer of Activision, will be appointed Chief Financial Officer of Activision Blizzard and Jean-François Grollemund, currently Chief Financial Officer of Vivendi Games, will be appointed Chief Accounting Officer of Activision Blizzard."
Not surprisingly, there are plenty of very rich people that have some things to say about this.
Jean-Bernard Lévy, Chairman of the Management Board and Chief Executive Officer of Vivendi kicked things off: “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.”
René Penisson, Member of the Management Board of Vivendi and current Chairman of Vivendi Games, then jumped in: “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.”
Next up, 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.
“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.”
Finally, Mike Morhaime, President and Chief Executive Officer of Blizzard, finished off the love-in: "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.”
So, um, holy crap, didn't see this one coming.