Features & News

Vivendi is done with Activision/Blizzard

June 30, 2012, Author: Ray Willmott

Vivendi, the major shareholder in the Activision/Blizzard camp, is looking to offload their shares and move on…

Vivendi, who own a 61% majority stake in the Call of the Duty/World of Warcraft publisher, are seeking a buyer for shares reportedly worth $8.1 billion. However, should no buyer come forward, Vivendi will be forced take to the stock market and put it all up for grabs; either in bulk, or in part. Yikes!

This news comes shortly after Vivendi let go their CEO, Jean-Bernard Levy, earlier this week. Vivendi Chairman, Jean-Rene Fourtou, was reportedly under pressure from investors to restructure the company and boost stock prices from a nine-year low, which led to the possibility of the shares being sold. Levy expressed fierce opposition to this. Thus, he was let go.

It is being reported that selling these assets will help Vivendi with their serious debt liabilities.

Weighing in his thoughts, Michael Pachter is concerned about potential replacements for Vivendi’s shares, and ultimately, Activision/Blizzard’s future.

‘The problem is there are no readily apparent buyers for Activision. The only option left to Vivendi is to lever up Activision’s balance sheet and pay out all of its cash as a dividend, then spin the company off.’

Regardless of this, Pachter recommends buying stock in Activision/Blizzard. Based on Call of Duty and World of Warcraft successes, that goes without saying!

Activision/Blizzard is the largest U.S. video-game publisher. Their shares rose 4.4 percent to $11.99 on June 29 in New York. However, their shares have declined 2.7 percent this year. Vivendi gained 3.1 percent to 14.63 euros in Paris, and is down 11 percent this year. The stock plummeted to a nine-year low of 12.01 euros on April 19.

According to data from Bloomberg, Activision/Blizzard trades at 14.4 times trailing earnings, below the 25.4 in fiscal 2010 and a five-year of high of 67.6 in 2007. In comparison, EA, the second-largest game company, trades at 30 times trailing profit.

Activision/Blizzard had $3.48 billion in cash, short-term investments as of March 31 and no debt, according to a quarterly filing. An annual report shows that last year, the company returned $886 million to shareholders in stock repurchases and dividends.

Unquestionably, Vivendi are the spinal column of this merger between Activision and Blizzard. Losing them could cause irreparable damage to the company, and completely change the landscape of the industry over the next few years. Especially if these shares end up on the open market.

More on this story as we get it.

(Source: Bloomberg, MCV)