Activision, Vivendi Games Merge

Activision Inc. and Vivendi Games will merge to form Activision Blizzard, which the companies say will be the world’s largest pure-play online and console game publisher. The deal brings together such major franchises as World of Warcraft, StarCraft and Diablo from Vivendi’s Blizzard Ent., and Activision’s Guitar Hero and movie-based properties including Spider-Man, Shrek and Transformers.

World of Warcraft has more than 9.3 million subscribers worldwide, making it the leading multi-player, online role-playing game franchise. The title has helped Vivendi Games reach a projected $1.1 billion in revenues for the 2007 calendar year. That number will jump to approximately $3.8 billion when combined with Activision’s annual revenues, giving Activision Blizzard the highest operating margins of any major third-party video game publisher, according to the companies.

Under the terms of the agreement, Vivendi Games will be merged with a wholly owned subsidiary of Activision. Shares of Vivendi Games will be converted into 295.3 million new shares of Activision common stock. At $27.50 per share of Activision common stock, this implies a value of approximately $8.1 billion for Vivendi, which will also purchase 62.9 million newly issued shares of Activision common stock at a price of $27.50 per share. As a result of these transactions, Vivendi will own an approximate 52% ownership stake in Activision Blizzard on a fully diluted basis.

Following completion of the transaction, Activision chairman and CEO Robert Kotick will become president and CEO of Activision Blizzard. Bruce Hack, the current CEO of Vivendi Games, will serve as vice-chairman and chief corporate officer of the new company. Mike Griffith will serve as president and CEO of Activision Publishing, which will include the Sierra Ent., Sierra Online and Vivendi Games Mobile divisions in addition to the Activision business. Mike Morhaime will continue to serve as president and CEO of Blizzard Ent.