Activision to buy back stake from Vivendi, gain independence

Still from Activision's
Still from Activision's "Call of Duty: Black Ops"
Still from Activision's
"Call of Duty: Modern Warfare 3" is displayed between its predecessors, "Call of Duty 4: Modern Warfare" (L) and Call of Duty: Modern Warfare 2" (R).
Ethan Miller/Getty Images

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French-based Vivendi SA is selling most of its majority stake in Santa-Monica-based Activision Blizzard Inc. — maker of such games as "World of Warcraft" and "Call of Duty" — for $8.2 billion, giving the video game company back its independence

Vivendi said Friday that 429 million of its shares will be sold to Activision itself for $5.83 billion, or $13.60 per share. Another 172 million shares will be sold for $2.34 billion to a consortium of investors including Activision CEO Bobby Kotick and Co-chairman Brian Kelly, who are contributing $100 million each, the Associated Press reported.

Vivendi acquired a majority stake in Activision in 2008 and combined it with its games unit, which included "Warcraft" publisher Blizzard Entertainment, so Activision will walk away a bigger company. Activision expects to complete the buy-back transaction by the end of September. That's just ahead of the holiday season.

In a statement, Kotick called the move a "tremendous opportunity" for the company and all of its shareholders.

"We should emerge even stronger — an independent company with a best-in-class franchise portfolio and the focus and flexibility to drive long-term shareholder value and expand our leadership position as one of the world’s most important entertainment companies," Kotick said.

The French media conglomerate Vivendi became Activision's parent company five years ago, when Vivendi merged its video game business, including Blizzard Entertainment, with Activision. The idea was to compete with Electronic Arts.

Activision has increased revenue every year, but Vivendi now faces $17 billion dollars in debt and is selling off assets. After the buyback, Vivendi will retain a 12 percent stake in Activision.

"We are grateful for Vivendi's partnership during this period, and we look forward to their continued support," Kotick said.

Research Analyst Michael Pachter of Wedbush Securities told KPCC's Brian Watt that there were some benefits to the merger in the early stages.

"Vivendi owned Universal Music Group, and so back when Activision made Guitar Hero, there was some synergy because they were able to sign some deals with Universal Music bands," says Pachter. But he believes Activision benefit from its new independence.

"I think the financial flexibility means Activision can try different things that maybe required capital that Vivendi wanted them not to, in order to conserve capital in order to pay more to Vivendi."

Early on the same day it announced the move towards independence, Activision also announced plans to release six new games for Nintendo's Wii U in the Fall, including a SpongeBob Squarepants game.