Report: Vivendi Turns To Activision Blizzard To Solve Its Financial Woes
After failing to find a buyer for its controlling shares in Activision Blizzard, Vivendi may take out a gigantic loan in the publisher's name for some much-needed financial relief.
According to the Financial Times (via Reuters), Vivendi will gain new managerial powers over Activision Blizzard tomorrow, the closing date of the 2007 Activision/Vivendi merger. The merger gave Vivendi a 61-percent stake in Activision.
Speaking with Joystiq, Wedbush Securities analyst Michael Pachter describes a potential scenario in which Vivendi can now take out a massive loan in Activision's name and then pay itself an equally sizable dividend. "Borrowing of $5 billion would permit a dividend of $8.5 billion," Pachter states. "As the holder of 61 percent of Activision's common stock at March 31, 2013, we estimate Vivendi would receive approximately $5.2 billion in cash, easing its mounting debt concerns." The move would leave Activision with a mountain of debt to overcome, while Vivendi uses the payoff to get its own finances in order.
In May, Activision announced a strong financial start to 2013, but warned that the second half of the year would be challenging due to competing IPs. The financial move Vivendi is reportedly considering could have a serious impact on Activision's outlook for the year, but that may be a trade off Vivendi is willing to take.
While some gamers would celebrate any financial hardship that Activision may find itself in, I think today's report is terrible news. Activision's latest earnings call reiterated the company's strategy to avoid making risky decisions. Gamers may decry the company's reliance on annual sequels, but those games – which still provide plenty of enjoyment to players – provide a steady source of income that keeps hundreds of talented programmers and artists in business. Despite Activision's efforts to avoid it, the company may get stuck with a huge amount of debt, through little fault of its own. Only Vivendi stands to gain from that scenario.