FEB. 5, 2008 • The merger between Vivendi Games and Activision, announced in December, will be the largest in the history of the video game industry. Assuming the merger goes through, Activision Blizzard will immediately challenge Electronic Arts as the largest independent game software publisher in the word. Furthermore, the majority ownership of Vivendi will represent the second large media conglomerate to become a major player in the video game space. Sony with its PlayStation systems will still have the largest overall presence, but Vivendi will have a larger presence in software.
Activision Blizzard will also be a more diversified company than almost any other player in the game space. They have products that go across all major game platforms and game genres. Activision Blizzard will be a leader in retail distributed products and emerging subscription based online models. Activision Blizzard will also be the only Western company with a major position in the emerging markets of China and Korea.
We thought it would be a good idea to put some of the numbers in perspective to give an overview of the deal looks like and what a combined Activision/Vivendi Games would look like from a financial perspective. We have combined 2006 and 2007 financial information from the two companies.
The Deal
On December 3, 2003 Activision (NASDAQ: ATVI) and Vivendi (NYSE:V) announced plans for a merger that would see Activision acquire Vivendi’s video game division, Vivendi Games. The merger is expected to be completed in the first half of 2008 and will result in a new company to be named Activision Blizzard. Depending on the proposed tender offer, Vivendi will be an owner of from 52% to 68% of Activision Blizzard after the deal is completed.
The merger proposal is complicated so this section summarizes some of the key points.
1) Activision will issue 358.2 million shares which will result in a total of 686 million outstanding shares (including the effect of potential dilution of securities through employee stock options, warrants etc.).
2) Activision will sell the 358.2 million shares to Vivendi.
a. Activision will acquire the Vivendi Games division for 295.3 million shares (or about $8.1 billion at a a price of $27.50 a share) b. Activision will receive $1.7 billion in cash for the remaining 62.9 million shares c. RESULT: Vivendi will own 52% of Activision.
3) New company is renamed Activision Blizzard.
4) Within a week after closing of the merger, the new company starts a cash tender offer buy back of up to 146.5 million shares of outstanding stock at a price of $27.50.
a. Vivendi will contribute up to $700 million of cash to the tender offer which would allow them to buy an additional 25.5 million shares.
b. Existing Activision shareholders would contribute the rest of the stock to the tender offer (121 million shares).
c. If tender offer is fully subscribed Vivendi will own 68% of Activision or 384 million out of 564.9 million shares.
Key Points
1) Cost to Vivendi is $2.4 billion cash: $1.7 billion for initial shares and $700 million for full participation in tender offer.
2) Vivendi Games is valued at about $8.1 billion.
3) Activision is being valued from $15.5 to $18.9 billion.
4) The tender offer may not be fully subscribed so shares outstanding after the merger could range from 565 million to 686 million with Vivendi ownership of Activision Blizzard anywhere from 52% to 68%.
Additional Data
