Activision, Vivendi merger reaps positive reactions

Stock prices up as analysts weigh in on deal; execs say union has been coming together for the last year.


Yesterday, Activision and Vivendi Games announced an $18.9 billion merger expected to dethrone Electronic Arts as the world's largest third-party publisher. Today investors reacted to the specifics of the deal and the newly christened Activision Blizzard, with a positive response reflected by the companies' stock prices.

It was a busy day for Activision shares, with nearly six times as many shares as normal trading hands. After closing the trading day on Friday at $22.15, Activision stock opened Monday up more than 20 percent to $26.70. However, that spike tapered off somewhat, with the stock up a more modest 13 percent at $24.97 near the end of the trading day. The merger had less of an impact on Vivendi stock, with the media conglomerate's shares trading up a little more than 1 percent to €31.71 on the Paris Stock Exchange.

In a conference call this morning, Vivendi CEO Jean-Bernard Levy confirmed that the deal had been in the offing for the last year. He also outlined some details of the acquisition for analysts, noting that Vivendi will wind up owning between 52 percent and 68 percent of Activision Blizzard stock, with current Activision shareholders retaining control of the remainder of the company. The company also confirmed that it might need to chalk up as much as $100 million in restructuring charges by the time the merger is complete.

An executive team for the proposed merger of Activision and Vivendi Games was also detailed. Current Activision CEO and chairman Robert Kotick would serve as Activision Blizzard's president and CEO, with Vivendi Games CEO Bruce Hack taking the roles of chief corporate officer and vice chairman in the new company. Mike Griffith will be the president and CEO of Activision Publishing, which will include the Sierra and Vivendi Games Mobile brands. Activision chief financial officer Thomas Tippl will reprise that role in the merged company, while his Vivendi Games counterpart Jean-François Grollemund will become Activision Blizzard's chief accounting officer.

In the same call, Blizzard president and CEO Mike Morhaime squashed a bit of speculation that the merger would have Activision bringing the World of Warcraft developer's hit franchises to consoles.

"At this point, there are no plans to release any of the Blizzard franchises on consoles," Morhaime flatly stated.

Analysts offered generally favorable assessments of the merger, though there were some lingering questions about how this would impact the industry at large. Lazard Capital Markets' Colin Sebastian called it a "very good fit" in a note to investors, and said it might affect a lot more than just Vivendi and Activision.

"For the industry, we believe the acquisition could signal additional consolidation, potentially including other leading publishers such as Electronic Arts, Ubisoft or THQ, while larger media companies such as Disney, Viacom and Time Warner continue to grow their interactive entertainment businesses," Sebastian wrote.

In his own investors' note, Pacific Crest Securities' Evan Wilson speculated that the deal could lead to Guitar Hero getting exclusive access to the catalog of artists from Vivendi subsidiary Universal Music Group. That stable of music includes acts from Bob Marley to Eric Clapton, as well as current Rock Band-featured groups Nirvana, The Who, and Bon Jovi.

Wilson also said it was unclear if the merger could cost Activision any of its high-profile licenses, like Shrek, Marvel Comics, or the Transformers. Many licensing deals include a clause that would allow the licensor to escape the agreement if there's a change in ownership control, but whether or not Activision's deals include such stipulations (or if the merger would activation those stipulations) is unknown.

"Although we pose these questions, they do not limit any of our optimism for the deal," Wilson wrote. "We absolutely believe it is positive for [Activision]."

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