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In a surprising Sunday news blockbuster, Activision and Vivendi Games have announced that they are merging to create "the worlds largest pure-play online and console game publisher". In all, the deal is valued at $18.9 billion. The new company,
Activision Blizzard, is expected to have approximately $3.8 billion in pro forma
combined calendar 2007 revenues and the highest operating margins of any major
third-party video game publisher. Word is:
Activision, Inc. (NASDAQ: ATVI) and Vivendi (Paris: VIV) today
announced that they have signed a definitive agreement to combine
Vivendi Games, Vivendi's interactive entertainment business -- which
includes Blizzard Entertainment’s World of Warcraft®, the world’s #1
multi-player online role-playing game franchise -- with Activision,
creating the world’s largest pure-play online and console game
publisher. The new company, Activision Blizzard, is expected to have
approximately $3.8 billion in pro forma combined calendar 2007 revenues
and the highest operating margins of any major third-party video game
publisher. On closing of the transaction, Activision will be renamed
Activision Blizzard and will continue to operate as a public company
traded on NASDAQ under the ticker ATVI.
Activision, one of the world’s leading independent publishers of
interactive entertainment, is best known for its top- selling
franchises, including Guitar Hero®, Call of Duty® and the Tony Hawk
series, as well as Spider-Man™, X-Men™, Shrek®, James Bond™ and
TRANSFORMERS™. Blizzard Entertainment, a division of Vivendi Games, has
projected calendar 2007 revenues of $1.1 billion, operating margins of
over 40% and approximately $520 million of operating profit. Blizzard
owns the #1 multi-player online role-playing game franchise, World of
Warcraft, which currently has over 9.3 million subscribers worldwide.
Blizzard’s World of Warcraft, Warcraft®, StarCraft® and Diablo® games
account for four of the top-five best-selling PC game titles of all
time. Vivendi Games also owns popular franchises, including Crash
Bandicoot™ and Spyro™. Pro forma for calendar 2007, Activision Blizzard
expects to generate approximately 70% of its revenues from owned
franchises. As a result of the business combination, Activision
Blizzard expects to have the most diversified and broadest portfolio of
interactive entertainment assets in its industry, positioning the
combined company to capitalize on the continued worldwide growth in
interactive entertainment.
Jean-Bernard Lévy, Chairman of the Management Board and Chief Executive
Officer of Vivendi stated: “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, added: “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.”
Said 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.”
Kotick continued: “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.”
Mike Morhaime, President and Chief Executive Officer of Blizzard,
added: "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.”
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