Impact of Activision Blizzard

The surprise announcement of the impending merger of Activision and Vivendi Games that was announced in December 2007 caused shockwaves throughout the industry that are still being felt now, in mid-2008, as the deal rolls towards completion.

The prospective company (still pending approval for its existence from stockholders and various government agencies) has made even further waves with other recent moves, such upcoming CEO Bobby Kotick floating concepts such as Blizzard being used to push Activision franchises such as Guitar Hero into Asian markets and the decision to leave the Entertainment Software Association (and as a result not taking part in this year's E3).

In this in-depth investigation, Gamasutra will be summarizing the details of the merger and look at their moves since the announcement, with commentary from some of the industry's most respected authorities in their field, including Wedbush Morgan's Michael Pachter and game attorney Thomas H. Buscaglia.

The Facts of the Deal

Activision and Vivendi announced on Sunday, December 3rd that they had signed definitive agreement to combine Vivendi Games and Activision into a new company, Activision Blizzard, creating "the world's largest pure-play online and console game publisher" -- a claim based on the expectation for an approximate $3.8 billion in pro-forma combined calendar 2007 revenues, the highest operating margin of a major third-party publisher.

Though this claim has been disputed (including here on Gamasutra) it's generally considered that Activision Blizzard will be at least on a par in size with Electronic Arts.

The transaction is still subject to the approval of Activision's stockholders, but has been approved by the European Commission and, of course, the boards of directors of Vivendi, Vivendi Games and Activision.

Under the terms of the announced agreement Vivendi Games is to be "merged with a wholly owned subsidiary of Activision" -- resulting shares of Vivendi Games being converted into 295.3 million new shares of Activision common stock.

Based on the transaction price of $27.50 per share of Activision common stock, this implies a value of approximately $8.1 billion for Vivendi Games.

Concurrently with this merger, Vivendi will purchase 62.9 million newly issued shares of Activision common stock at a price of $27.50 per share for a total of $1.7 billion in cash. As a result of these transactions, Vivendi will own an approximate 52% ownership stake in Activision Blizzard.

Following the completion of the transaction there will be a slight executive shake-up: Robert Kotick will be president and chief executive officer of Activision Blizzard. Bruce Hack, current chief executive officer of Vivendi Games, will serve as vice-chairman and chief corporate officer of Activision Blizzard.

Mike Griffith will serve as president and chief executive officer of Activision Publishing, which is to include the Sierra Entertainment, Sierra Online and Vivendi Games Mobile divisions in addition to the Activision business.

Implying that they intend to "leave well enough alone", Mike Morhaime is to keep his executive position, and continue to serve as president and chief executive officer of Blizzard Entertainment.