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Vivendi and Activision to merge and create Activision Blizzard

Posted on 3-Dec-2007 19:00 | Filed under: News

Activision, Inc. and Vivendi have signed a definitive agreement to combine Vivendi Games, Vivendi's interactive entertainment business -- which includes Blizzard Entertainment�s World of Warcraft, the world�s #1 multi-player online role-playing game franchise -- with Activision, creating the world�s largest pure-play online and console game publisher.

The new company, Activision Blizzard, is expected to have approximately US$3.8 billion in combined calendar 2007 revenues and the highest operating margins of any major third-party video game publisher.

On closing of the transaction, Activision will be renamed Activision Blizzard and will continue to operate as a public company traded on NASDAQ under the ticker ATVI.

Activision, one of the world�s leading independent publishers of interactive entertainment, is best known for its top- selling franchises, including Guitar Hero, Call of Duty and the Tony Hawk series, as well as Spider-Man, X-Men, Shrek, James Bond and TRANSFORMERS.

Blizzard Entertainment, a division of Vivendi Games, has projected calendar 2007 revenues of US$1.1 billion, operating margins of over 40% and approximately US$520 million of operating profit. Blizzard owns the #1 multi-player online role-playing game franchise, World of Warcraft, which currently has over 9.3 million subscribers worldwide.

Blizzard�s World of Warcraft, Warcraft, StarCraft and Diablo games account for four of the top-five best-selling PC game titles of all time.

Vivendi Games also owns popular franchises, including Crash Bandicoot and Spyro. Pro forma for calendar 2007, Activision Blizzard expects to generate approximately 70% of its revenues from owned franchises.

As a result of the business combination, Activision Blizzard expects to have the most diversified and broadest portfolio of interactive entertainment assets in its industry, positioning the combined company to capitalize on the continued worldwide growth in interactive entertainment.

Under the terms of the agreement, Vivendi Games will be merged with a wholly owned subsidiary of Activision. In the merger, shares of Vivendi Games will be converted into 295.3 million new shares of Activision common stock. Based on the transaction price of US$27.50 per share of Activision common stock, this implies a value of approximately US$8.1 billion for Vivendi Games. Concurrently with the merger, Vivendi will purchase 62.9 million newly issued shares of Activision common stock at a price of US$27.50 per share � a premium of 31% to Activision�s average closing price over the past 20 trading days � for a total of $1.7 billion in cash. As a result of these transactions, Vivendi will own an approximate 52% ownership stake in Activision Blizzard on a fully diluted basis.

Within five business days after closing the transaction, Activision Blizzard will launch a US$4 billion all-cash tender offer to purchase up to 146.5 million Activision Blizzard common shares at US$27.50 per share. The tender offer will be funded by Activision Blizzard�s cash on hand at closing, including the US$1.7 billion in cash received from the Vivendi share purchase.

In addition, Vivendi has agreed to acquire from Activision Blizzard additional newly issued shares for up to an additional US$700 million of Activision common stock at US$27.50 per share, the proceeds of which would also be used to fund the tender offer. Any remaining funds required to complete the tender offer will be borrowed by Activision Blizzard from Vivendi or third-party lenders. If the tender offer is fully subscribed, Vivendi will own an approximate 68% ownership stake in Activision Blizzard on a fully diluted basis.

Activision Blizzard�s board of directors will be comprised of eleven members: six directors designated by Vivendi, two Activision management directors and three independent directors who currently serve on Activision�s board of directors. Ren� Penisson, currently a member of the Management Board of Vivendi and Chairman of Vivendi Games, will serve as Chairman of Activision Blizzard. Brian Kelly, currently Co-Chairman of Activision, will serve as Co-Chairman of Activision Blizzard.