Vivendi merges with Activision in $18.9B deal

Game industry sees paradigm shift as number two and number three independent game publishers ally to form "Activision Blizzard"; Vivendi to control 52 percent stake.

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For years, Electronic Arts has been the largest third-party publisher on the planet. No longer. Two days after EA's CEO said game-industry mergers were winding down, the biggest such union in history was announced. Today, Vivendi Games and Activision declared they were joining forces in a deal valued at $18.9 billion to create the world's biggest independent game publisher. The new company, called Activision Blizzard, will remain publicly traded on the NASDAQ market in New York under the symbol ATVI.

Under the terms of the deal, French media conglomerate Vivendi SA will contribute the entirety of its Vivendi Games subdivision--worth $8.1 billion--as well as $1.7 billion in cash for a 52 percent controlling stake in Activision Blizzard. Once the deal is approved, Activision Blizzard will offer holders of Activision's 146.7 million shares $27.50 for each share--a 31 percent premium over the 20-day average closing price.

If the union is approved by US regulators, Activision Blizzard's estimated $3.8 billion in annual revenue will eclipse EA, which expects $3.35 to $3.65 billion in net revenue for its 2008 fiscal year. It will also put many marquee game franchises--Call of Duty, Tony Hawk, F.E.A.R., Diablo, StarCraft, Warcraft, and World of Warcraft--under a single roof. It will also give Activision's Guitar Hero franchise direct access to the library of Vivendi's Universal Music Group, the world's largest record label.

Because the deal calls for the melding of Activision and Vivendi management teams, both were publicly pleased. "This alliance is a major strategic step for Vivendi and is another illustration of our drive to extend our presence in the entertainment sector," said Vivendi CEO Jean-Bernard Levy. "By combining Vivendi's games business with Activision, we are creating a worldwide leader in a high-growth industry."

Activision CEO Bobby Kotick also gave the union his blessing. "This is a pivotal event in the continuing transformation of the interactive entertainment industry," he declared. "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."

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