Friday, July 26, 2013

Activision Blizzard's Great Escape

Ahead of today's Activision Blizzard's conference call came some momentous news.  No, not that World of Warcraft had lost another 600 thousand subscriptions in the second quarter, bringing the total down to 7.7 million.  The big news was that the company plus and outside investment group was purchasing back most of the controlling interest that Vivendi owned in the U.S. gaming giant.  From the Guardian...
"Video game publisher Activision Blizzard has announced a deal to buy itself back from French media giant Vivendi. The company, responsible for hits such as Call of Duty and World of Warcraft, will purchase 429 million shares for $5.83bn. 

"Concurrently, Activision Blizzard CEO Bobby Kotick and co-chairman Brian Kelly have formed ASAC II LP, an investment vehicle through which they will purchase 172 million company shares for approximately $2.34bn in cash, or $13.60 per share. This will make it the largest Activision shareholder, and the arrangement includes $100m personally invested by Kotick and Kelly. 

"Included in the same investor group is Tencent, the powerful Chinese investment company that runs social networks, internet service providers and online gaming portals in China."
While the story I've told in my few blog posts on the subject is of a financially struggling media conglomerate raiding a successful gaming company's corporate wallet, one could justifiably argue today's financial activity ends Activision's raid on Vivendi that netted it the big prize of World of Warcraft.  From the USA Today coverage of the buy out...
"Activision and Vivendi announced their merger back in 2008 and the company became Activision Blizzard. '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,' [Activision Blizzard CEO Bobby] Kotick said. '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.'"
According to the Activision Blizzard press release, the company will fund its portion of the transaction with $1.2 billion in funds located in the U.S. and take on $4.6 billion in new debt.  Gamasutra reported that on this morning's conference call that Tencent will not have a representative on the Activision Blizzard board and will act strictly as a passive investor.  Tencent was involved with Activision Blizzard's distribution of Call of Duty in China, so the Chinese company already had a financial interest in seeing the U.S. game company do well.

2 comments:

  1. This news sounds almost positive.

    It doesn't look like vivendi threatening to raid Activision/Blizzard, but vivendi gets paid a chunk of money ($5.83B) while forcing activision/blizzard to take on $4.6B in debt.

    How can vivendi loose ?

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  2. Vivendi no longer has majority shares in the company. So they won't be able to force economic decisions anymore.

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