By Ian Sherr And Sam Schechner
Activision Blizzard Inc. said it has reached an agreement to buy
back nearly $6 billion worth of Vivendi SA's holding in the
company, ending months of negotiations over the fate of the
videogame giant.
Santa Monica, Calif.-based Activision said Thursday it will buy
429 million shares for about $13.60 per share, reducing Paris-based
conglomerate Vivendi from being majority shareholder. Activision
said it would fund the purchase with $1.2 billion in cash on hand
from its domestic accounts and approximately $4.6 billion in debt
financing from banks including J.P. Morgan and Bank of America
Merrill Lynch.
While the purchase price represents a haircut on the current
value of Activision's shares, which closed down 1.3% at $15.18
Thursday, Vivendi said in a statement that it is above the
historical average for the videogame company.
Activision, best known for its "Call of Duty" war-simulation
games and "World of Warcraft" online fantasy franchise, had $4.3
billion in cash and cash equivalents at the end of March, but $2.7
billion is held offshore and would be subject to U.S. taxes if
repatriated, according to company filings.
In a separate transaction, Vivendi is also selling 172 million
shares-- about $2.3 billion worth at $13.60 a share-- to an
investment group led by Bobby Kotick, Activision's chief executive,
and Brian Kelly, the company's co-chairman. The two men committed a
combined $100 million to the effort. That group will hold 24% of
the Activision's shares, making it the largest shareholder.
Vivendi said it will continue to hold about 83 million shares,
or 12% of the company, and has pledged to retain its shares in a
staggered 15-month lockup. The deal is expected to close in
September.
When the deal closes, Vivendi's representatives on Activision's
board-- including Vivendi CFO and current Activision Chairman
Philippe Capron--are expected to step down, people familiar with
the matter said.
Laid low by struggles at its main telecommunications unit,
Vivendi has begun selling off stakes in various companies to pay
down debt and help refashion itself into a leaner media company.
The French conglomerate took its controlling stake in 2008 as
Activision merged with Vivendi's games unit, which at the time
included Blizzard Entertainment. Activision's sales have since
grown, to $4.9 billion in 2012 from $4.3 billion in 2009.
Friday's deal had been the subject of tough negotiations leading
up to board meetings this week at Vivendi and Activision. Vivendi
has been discussing pushing for a dividend of over $3 billion from
Activision as recently as earlier this week, according to people
familiar with the matter. The two companies have also discussed a
share transaction since at least last year.
The Paris-based company, which controlled a majority of
Activision's board, in early July got the power to force certain
actions over the objections of independent Activision directors,
according to securities filings.
Activision separately also released preliminary second fiscal
quarterly results. The company said it expects to report earnings
per share of 28 cents on $1.05 billion in sales.
Excluding items such as deferred revenue, the company said it
expects to report earnings of 8 cents per share on $608 million in
revenue. Analysts on average had been expecting earnings of 5 cents
per share on $601.1 million in sales.
The Activision deal caps a big week of deal making for Vivendi,
which Tuesday announced that it had entered negotiations with
Emirates Telecommunications Corp to sell control of African phone
operator Maroc Telecom for EUR4.2 billion ($5.6 billion). All told,
the two deals could give Vivendi more than EUR10 billion in cash by
the end of the year.
Write to Ian Sherr at Ian.Sherr@wsj.com
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