Update: Activision Buys Independence From Vivendi For $8 Billion
Update: On a special call with investors, Activision disclosed more details about its acquisition of Vivendi's United States holding company. Vivendi, which up until yesterday held 60 percent of Activision Blizzard shares, will now control approximately 12 percent (83 million of 690 outstanding shares). Kotick and Kelly's investor group will hold 24.9 percent of shares, with the pair representing the group on the nominating and governance committee.
In effect, this gives Tencent internal influence among the investor group, but not direct exertion over the direction of Activision Blizzard. However, it was also disclosed that should any member of the investor group decide to sell its shares, there is no right of first refusal. In other words, the shares will be open for bidding without advantage. This allows Tencent (and the others) to exert pressure on Kotick and Kelly privately. Tencent's interest comes from the existing partnership with Activision on Call of Duty Online in China.
As a result of the transaction, Activision is predicting improved performance for this year. We'll know more on August 1 when the company holds its second quarter earnings call.
Earlier in the week, we told you that news was coming that could severely shift Activision's financial profile. Late last night, the company announced that it was separating itself from parent Vivendi, and the price tag is enormous.
$5.83 billion dollars of the buyout will come from Activision, while another $2.34 billion will come from a group of investors led by Activision CEO Bobby Kotick and co-chairman Brian Kelly. The pair have put a combined $100 million of their own funds behind the purchase. Tencent, which owns 40 percent of Epic Games is part of this group.
Activision's part of the purchase comes from $1.2 billion of domestic funds, with another $4.6 billion coming from Bank of America, Merrill Lynch, and J.P. Morgan. Activision has managed to accomplish what Vivendi itself couldn't do in over a year of trying to sell its stake: find someone willing and able to buy.
This is the best possible outcome for Activision, which was about to be bled dry by Vivendi. As I discussed earlier in the week, a special dividend that would have pulled $3 billion from the company would have gotten Activision absolutely nothing except debt.
This purchase gives Bobby Kotick and company freedom, and it's going to make him and his investors very rich. One of those investors, Tencent, is of particular interest. Their 40 percent investment in Epic paired with ownership of some part of Activision could have interesting potential down the line. I wouldn't hold my breath for Gears of Duty, though.