ACTIVISION BLIZZARD: Vivendi to increase stake in Activision

French entertainment giant Vivendi is set to increase its stake in Activision from 52 per cent to 68 per cent within five days of the initial deal closing.

The news comes following yesterday’s announcement about the ‘merger’ of Vivendi and Activision to create new games giant Activision Blizzard.

In a conference call to investors today, Activision CFO Thomas Tippl explained:

Within five days post-closing the new company [Activision Blizzard] will launch a $4 billion cash tender offer to acquire about 146.5 million [Activision] shares at a price of $27.50 per share. This would provide a tender for about 50 per cent of Activision’s current outstanding shares – and if the tender is fully subscribed would bring Vivendi’s ownership stake to 68 per cent.

The tender offer will be funded by three transfers of cash. The first round of funding will come from the new company’s closing including the $1.7billion initial contribution from Vivendi. Second, Vivendi will fund another $700 million in exchange for an additional 25.5 million primary shares. And then if necessary the remainder will come from a new release of debt from Activision Blizzard. After the tender, this debt is not expected to exceed $800 million.

If fully subscribed, the post-tender offer fully diluted share count would be about 565 million shares. This is very well designed, as it provides shareholders with the opportunity to participate in the future growth of Activision Blizzard – the new leader in interactive entertainment.

The ability to instantly translate Vivendi assets into superior return for [Activision] shareholders was the principal driver.”

Currently, Vivendi is set to acquire 358.2 million Activision shares in exchange for its gaming assets (currently valued at $8.1 billion) and $1.7 billion cash – resulting in 52 per cent ownership of the company.