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(BN) Activision Becomes Independent With Buyout of Parent Vivend i (1)
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Activision Becomes Independent With Buyout of Parent Vivendi (1)
2013-07-26 06:32:10.701 GMT
(Updates with CEO comment in fourth paragraph.)
By Cliff Edwards
July 26 (Bloomberg) -- Activision Blizzard Inc. and a management group led by Chief Executive Officer Bobby Kotick agreed to buy out parent Vivendi SA’s controlling stake in the biggest U.S. video-game publisher for $8.17 billion.
Activision, based in Santa Monica, California, will take on debt to purchase 429 million shares held by Paris-based Vivendi for $13.60 each, for a total of $5.83 billion, according to a statement yesterday. Kotick and his partners, who include co- Chairman Brian Kelly, Chinese video-game publisher Tencent Holdings Ltd., Davis Advisors and Leonard Green & Partners, will pay $2.34 billion for 172 million shares.
The transactions, at a 10 percent discount to yesterday’s closing share price, make Activision an independent company again, after 5 years of Vivendi control. Kotick’s group will own
25 percent while debt-laden Vivendi gains cash and is left with
12 percent. The agreement ends months of uncertainty for the maker of “Call of Duty” and “World of Warcraft.” Vivendi has been seeking ways to extract cash from Activision, including discussions of a buyback or dividend.
“We tried to construct a transaction that rewarded our public shareholders and this structure accomplishes that,”
Kotick said in a telephone interview.
Activision said on Feb. 7 that it may consider stock buybacks, dividents, acquisitions or other unusual transactions to return cast to its shareholders.
Debt Financing
Vivendi, Europe’s biggest media and telecommunications company, last year failed to find buyers for its 61 percent Activision stake, and is re-evaluating its structure amid sluggish share performance and tough competition in the French mobile market. The company said this week it is in exclusive talks to sell its stake in Moroccan phone company Maroc Telecom SA to Emirates Telecommunications Corp. for 4.2 billion euros ($5.5 billion) to focus on media.
Activision plans to fund the buyback with $1.2 billion in cash and about $4.6 billion in debt financing, according to the statement. The company secured financing from Bank of America- Merrill Lynch and JPMorgan Chase & Co.
The deal avoids a tender offer to purchase all outstanding shares, said Michael Pachter, an analyst with Wedbush Securities in Los Angeles. By adding the investment group, in which Kotick and Kelly contributed $50 million each, Activision also will take on less net debt, Pachter said.
“It’s pretty neutral to shareholders the way it was worked,” Pachter said. “They generate about $1.1 billion in cash a year, so it’ll probably take them about four years to pay off the debt.”
‘Win, Win’
After reducing the outstanding share count, the company will take on $1.4 billion of net debt, according to the statement, accretive to 2013 earnings of between 18 percent and
29 percent on a GAAP basis.
“This looks like a win, win, win for Activision, Vivendi and Activision shareholders,” said Colin Sebastian, an analyst at Robert Baird & Co. “It’s a better outcome than a special dividend to Vivendi, and I expect Activision will function even better as an independent company without the overhang of a struggling parent.”
Activision, which has advanced 43 percent this year, had a market value of $17 billion at yesterday’s close.
Vivendi’s board approved terms of the transaction at its quarterly meeting on July 22, according to a person familiar with the discussions who wasn’t authorized to speak for the company.
+------------------------------------------------------------------------------+
Activision Becomes Independent With Buyout of Parent Vivendi (1)
2013-07-26 06:32:10.701 GMT
(Updates with CEO comment in fourth paragraph.)
By Cliff Edwards
July 26 (Bloomberg) -- Activision Blizzard Inc. and a management group led by Chief Executive Officer Bobby Kotick agreed to buy out parent Vivendi SA’s controlling stake in the biggest U.S. video-game publisher for $8.17 billion.
Activision, based in Santa Monica, California, will take on debt to purchase 429 million shares held by Paris-based Vivendi for $13.60 each, for a total of $5.83 billion, according to a statement yesterday. Kotick and his partners, who include co- Chairman Brian Kelly, Chinese video-game publisher Tencent Holdings Ltd., Davis Advisors and Leonard Green & Partners, will pay $2.34 billion for 172 million shares.
The transactions, at a 10 percent discount to yesterday’s closing share price, make Activision an independent company again, after 5 years of Vivendi control. Kotick’s group will own
25 percent while debt-laden Vivendi gains cash and is left with
12 percent. The agreement ends months of uncertainty for the maker of “Call of Duty” and “World of Warcraft.” Vivendi has been seeking ways to extract cash from Activision, including discussions of a buyback or dividend.
“We tried to construct a transaction that rewarded our public shareholders and this structure accomplishes that,”
Kotick said in a telephone interview.
Activision said on Feb. 7 that it may consider stock buybacks, dividents, acquisitions or other unusual transactions to return cast to its shareholders.
Debt Financing
Vivendi, Europe’s biggest media and telecommunications company, last year failed to find buyers for its 61 percent Activision stake, and is re-evaluating its structure amid sluggish share performance and tough competition in the French mobile market. The company said this week it is in exclusive talks to sell its stake in Moroccan phone company Maroc Telecom SA to Emirates Telecommunications Corp. for 4.2 billion euros ($5.5 billion) to focus on media.
Activision plans to fund the buyback with $1.2 billion in cash and about $4.6 billion in debt financing, according to the statement. The company secured financing from Bank of America- Merrill Lynch and JPMorgan Chase & Co.
The deal avoids a tender offer to purchase all outstanding shares, said Michael Pachter, an analyst with Wedbush Securities in Los Angeles. By adding the investment group, in which Kotick and Kelly contributed $50 million each, Activision also will take on less net debt, Pachter said.
“It’s pretty neutral to shareholders the way it was worked,” Pachter said. “They generate about $1.1 billion in cash a year, so it’ll probably take them about four years to pay off the debt.”
‘Win, Win’
After reducing the outstanding share count, the company will take on $1.4 billion of net debt, according to the statement, accretive to 2013 earnings of between 18 percent and
29 percent on a GAAP basis.
“This looks like a win, win, win for Activision, Vivendi and Activision shareholders,” said Colin Sebastian, an analyst at Robert Baird & Co. “It’s a better outcome than a special dividend to Vivendi, and I expect Activision will function even better as an independent company without the overhang of a struggling parent.”
Activision, which has advanced 43 percent this year, had a market value of $17 billion at yesterday’s close.
Vivendi’s board approved terms of the transaction at its quarterly meeting on July 22, according to a person familiar with the discussions who wasn’t authorized to speak for the company.
