Vivendi and Activision announced today that they have signed an agreement to combine Vivendi Games — which includes Blizzard Entertainment — with Activision, creating the world’s largest video game publisher.

According to a statement Sunday, The new company, called Activision Blizzard, is expected to have approximately $3.8 billion in revenues this year and the largest operating margins (read: the richest) video game publisher in the world.

“This is … a pivotal event in the continuing transformation of the interactive entertainment industry,” said Robert Kotick, Activision’s Chairman and Chief Executive Officer. “By combining leaders in mass-market entertainment and subscription-based online games, Activision Blizzard will be the only publisher with leading market positions across all categories of the rapidly growing interactive entertainment software industry and reach the broadest possible audiences.”

Vivendi/Blizzard bring World of Warcraft, the largest and most proliferated online game while Activision already boasts mega-hit console and PC games including the best-selling Guitar Hero franchise.

“By joining forces with Vivendi Games, we will become the immediate leader in the highly profitable online games business,” said Kotick.

Financials

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 $27.50 per share of Activision common stock, this implies a value of approximately $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 $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. When the transaction finalizes, Activision will be renamed Activision Blizzard and will continue to operate as a public company traded on NASDAQ under the ticker ATVI.

A host of managerial moves will be made also.

Robert Kotick will be President and Chief Executive Officer of Activision Blizzard. Bruce Hack, current Chief Executive Officer of Vivendi Games, becomes Vice-Chairman and Chief Corporate Officer of Activision Blizzard, in charge of finance, human resources and legal matters. Mike Griffith will serve as President and Chief Executive Officer of Activision Publishing, which after deal finalizes, will also include the Sierra Entertainment, Sierra Online and Vivendi Games Mobile divisions.

Mike Morhaime will continue to serve as President and Chief Executive Officer of Blizzard Entertainment. Thomas Tippl, currently Chief Financial Officer of Activision, will be appointed Chief Financial Officer of Activision Blizzard and Jean-Fran§ois Grollemund, currently Chief Financial Officer of Vivendi Games, will be appointed Chief Accounting Officer of Activision Blizzard.

Vivendi’s board of directors has approved the deal, which is now subject to the approval of Activision’s shareholders and regulatory officials.

This is one of the largest corporate transactions in the history of the video game industry. Both companies are promising a painless transition.

“There will be no changes to our games, our websites, our personnel or our day-to-day operations as a result of the deal,” said Blizzard, in a statement on their website. “However, this combining of resources will benefit all of the companies involved and will further strengthen Blizzard’s ability to continue delivering high-quality content for our players around the world for many years to come.” Blizzard is offering fans a FAQ to explain the merger.

About The Author

John Guilfoil is the editor-in-chief of Blast: Boston's Online Magazine and the Blast Magazine Network. He can be reached at [email protected]. Tweet @johnguilfoil.

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