by JR Cook - 11 years ago     show comments

Breaking news just hit a few moments ago – Polygon has been reporting that Activision Blizzard is breaking away from Vivendi Universal in a deal worth $8.7 Billion, basically buying themselves back in a two-part share acquisition.

Vivendi has been looking for several months now to sell off Activision Blizzard and couldn’t find any real buyers – so it’s not overly surprising that Activision Blizzard would end up buying their independence. Now the questions becomes, what does this mean for the future of Blizzard? More than likely nothing that gamers are going to care too much about, but it might mean something completely different to investors.

The story is still breaking and not a lot of information is out there yet, but we’ll keep you up to date as we hear more.

EDIT: The New York Times has more information on this deal.

Under a deal that was announced early Friday, Activision Blizzard and a group of investors led by the company’s management will buy back shares owned by Vivendi, the French conglomerate that controls the video game maker, leaving a majority of Activision Blizzard’s shares held by the investing public.

Activision Blizzard will buy about 429 million of its shares shares and certain tax attributes from Vivendi for roughly $5.83 billion in cash, or $13.60 a share, the company said. In addition, Robert A. Kotick, 50, the chief executive, and Brian Kelly, the co-chairman, are leading a group in buying about 172 million shares of the company from Vivendi for about $2.34 billion.

Vivendi will retain a stake of about 12 percent, or 83 million shares, in Activision Blizzard, the company said. Mr. Kotick will continue to lead the company and Mr. Kelly will become the sole chairman, according to the terms of the deal.

The transactions are a “tremendous opportunity” for Activision Blizzard, the maker of popular game franchises like Call of Duty, World of Warcraft and Diablo, Mr. Kotick said in a statement.

This is pretty interesting timing as we are now less than a week away from the next Activision Blizzard quarterly investor conference call which will take place on August 1. Some pretty exciting times for the company in buying it’s independence and couple this with possibly a Hearthstone beta in the next week or so it could make that August 1 call a rather interesting one to listen to.

EDIT 2: The press release is now out for the transaction. It appears according to this that WoW is now down to 7.7 million subscribers which is a drop from the 8.3 million it was back in March. Queue up the folks standing on the corners with “THE END IS NIGHT” signs… well, or just the trolls on the interwebs.

Activision Blizzard Announces Transformative Purchase of Shares from Vivendi and New Capital Structure

Company to Buy Back Approximately 429 Million Shares from Vivendi for $5.83 Billion

Investor Group Led By CEO Bobby Kotick and Co-Chairman Brian Kelly to Separately Purchase Approximately 172 Million Activision Blizzard Shares from Vivendi for $2.34 Billion

New Capital Structure Expected to Drive Meaningful Earnings-Per-Share Accretion

Activision Blizzard Reports Preliminary Second Quarter Results

SANTA MONICA, Calif.–(BUSINESS WIRE)–Activision Blizzard, Inc. (Nasdaq: ATVI) (the “Company”), a global leader in interactive entertainment, announced today that it reached an agreement under which it will acquire from Vivendi (Euronext Paris: VIV) approximately 429 million Company shares and certain tax attributes, in exchange for approximately $5.83 billion in cash, or $13.60 per share acquired before taking into account the future benefit from these tax attributes. In a simultaneous transaction, ASAC II LP, an investment vehicle led by Activision Blizzard CEO Bobby Kotick and Co-Chairman Brian Kelly, to which they have personally committed $100 million combined, separately will purchase approximately 172 million Company shares from Vivendi for approximately $2.34 billion in cash, or $13.60 per share.

Following the completion of the transaction, Activision Blizzard will be an independent company with the majority of its shares owned by the public. The Company will be led by Bobby Kotick as Chief Executive Officer and Brian Kelly as Chairman. Vivendi will no longer be the majority shareholder, but will retain a stake of 83 million shares or approximately 12%. ASAC II LP—the investor group which, in addition to Kotick and Kelly, includes Davis Advisors, Leonard Green & Partners, L.P., Tencent, as well as one of the largest global institutional investors—will own a stake of approximately 24.9%.

Activision Blizzard expects that its new outstanding share count and capital structure (which will include approximately $1.4 billion of net debt) will result in expected pro forma 2013 earnings-per-share (EPS) accretion of between 18% and 29% on a GAAP basis and between 23% and 33% on a non-GAAP basis.

Bobby Kotick, CEO of Activision Blizzard, said, “These transactions together represent a tremendous opportunity for Activision Blizzard and all its shareholders, including Vivendi. We should emerge even stronger—an independent company with a best-in-class franchise portfolio and the focus and flexibility to drive long-term shareholder value and expand our leadership position as one of the world’s most important entertainment companies. The transactions announced today will allow us to take advantage of attractive financing markets while still retaining more than $3 billion cash on hand to preserve financial stability.”

Mr. Kotick continued, “Our successful combination with Blizzard Entertainment five years ago brought together some of the best creative and business talent in the industry and some of the most beloved entertainment franchises in the world, including Call of Duty® and World of Warcraft®. Since that time, we have generated over $5.4 billion in operating cash flow and returned more than $4 billion of that to shareholders via buybacks and dividends. We are grateful for Vivendi’s partnership through this period, and we look forward to their continued support.”

Activision Blizzard will fund the acquisition with the combination of approximately $1.2 billion of domestic cash on hand and approximately $4.6 billion of debt proceeds, net of fees and upfront interest, accessed through the capital markets and bank financing. The Company has received committed financing for the transaction from Bank of America Merrill Lynch and J.P. Morgan. The transaction is expected to close by the end of September 2013, subject to customary closing conditions.

A special committee of independent directors was formed to represent the Company in negotiating and evaluating the transactions.

Please see the Company’s Current Report on Form 8-K being filed with the Securities and Exchange Commission and the exhibits thereto for further information about the terms of the transactions.

Activision Blizzard’s financial advisor on the transaction is J.P. Morgan Securities LLC and its legal counsel is Skadden, Arps, Slate, Meagher & Flom LLP. The Special Committee’s financial advisor is Centerview Partners and its legal counsel is Wachtell, Lipton, Rosen & Katz. ASAC II LP’s financial advisor is Allen & Company LLC and its legal counsel is Sullivan & Cromwell LLP.

Preliminary Second Quarter Results and Full-Year Outlook

For the second quarter, Activision Blizzard expects to report GAAP net revenue of approximately $1.05 billion and Non-GAAP net revenue of approximately $608 million, with GAAP earnings per diluted share of $0.28 and Non-GAAP earnings per diluted share of approximately $0.08. In addition, the Company will announce full second quarter results on August 1, 2013 and hold its regularly scheduled conference call for analysts and investors at that time.

For the quarter, Activision Blizzard was the #1 independent publisher in North America and Europe combined, including accessory packs and figures, with the #1 and #2 best-selling titles year-to-date– Skylanders Giants™ and Call of Duty: Black Ops II.¹ Additionally, Blizzard Entertainment’s World of Warcraft® remained the world’s #1 subscription-based MMORPG, ending the quarter with approximately 7.7 million subscribers.²

The Company raised its full-year 2013 GAAP net revenue outlook to $4.31 billion and its earnings per diluted share outlook to $0.77, up from its prior net revenue outlook of $4.22 billion and earnings per diluted share outlook of $0.73. Additionally, the Company affirmed its full-year 2013 Non-GAAP net revenue outlook of $4.25 billion and earnings per diluted share outlook of $0.82. These full-year outlook numbers do not yet account for any benefit of earnings per share accretion from the announced transaction.

Conference Call and Webcast Information

Activision Blizzard will host a conference call and live webcast on Friday, July 26, 2013 at 8:30 a.m. ET, 2:30 p.m. Paris time, 1:30 p.m. London time to discuss this announcement. The company welcomes listeners to the call live by dialing (866) 953-6860 in the U.S. or (617) 399-3484 outside the U.S. using the passcode 14828517. The live webcast of the call can be accessed at www.activisionblizzard.com.

For those unable to listen to the live conference call, an audio replay of the call will be available through August 9, 2013 and can be accessed by calling (888) 286-8010 in the U.S. or (617) 801-6888 outside the U.S. and using the passcode: 30609761. In addition, a webcast replay also will be archived on the Investor Relations section of Activision Blizzard’s website.

About Activision Blizzard

Activision Blizzard, Inc. is the world’s largest and most profitable independent interactive entertainment publishing company. It develops and publishes some of the most successful and beloved entertainment franchises in any medium, including Call of Duty, World of Warcraft,Skylanders, and Diablo®. Headquartered in Santa Monica California, it maintains operations throughout the United States, Europe, and Asia. Activision Blizzard develops and publishes games on all leading interactive platforms and its games are available in most countries around the world. More information about Activision Blizzard and its products can be found on the company’s website,www.activisionblizzard.com.

¹According to The NPD Group, GfK Chart-Track and Activision Blizzard internal estimates, including toys and accessories

²According to Activision Blizzard internal estimates

Subscriber Definition: World of Warcraft subscribers include individuals who have paid a subscription fee or have an active prepaid card to play World of Warcraft, as well as those who have purchased the game and are within their free month of access. Internet Game Room players who have accessed the game over the last thirty days are also counted as subscribers. The above definition excludes all players under free promotional subscriptions, expired or cancelled subscriptions, and expired prepaid cards. Subscribers in licensees’ territories are defined along the same rules.