Activision to Buy Most of Vivendi Stake

Activision Blizzard Inc. said it has reached an agreement to buy back nearly $6 billion worth of Vivendi SA's holding in the company, ending months of negotiations over the fate of the videogame giant.

Santa Monica, Calif.-based Activision said Thursday it will buy 429 million shares for about $13.60 per share, reducing Paris-based conglomerate Vivendi from being majority shareholder. Activision said it would fund the purchase with $1.2 billion in cash on hand from its domestic accounts and approximately $4.6 billion in debt financing from banks including J.P. Morgan and Bank of America Merrill Lynch.

While the purchase price represents a haircut on the current value of Activision's shares, which closed down 1.3% at $15.18 Thursday, Vivendi said in a statement that it is above the historical average for the videogame company.

Activision, best known for its "Call of Duty" war-simulation games and "World of Warcraft" online fantasy franchise, had $4.3 billion in cash and cash equivalents at the end of March, but $2.7 billion is held offshore and would be subject to U.S. taxes if repatriated, according to company filings.

In a separate transaction, Vivendi is also selling 172 million shares-- about $2.3 billion worth at $13.60 a share-- to an investment group led by Bobby Kotick, Activision's chief executive, and Brian Kelly, the company's co-chairman. The two men committed a combined $100 million to the effort. That group will hold 24% of the Activision's shares, making it the largest shareholder.

Vivendi said it will continue to hold about 83 million shares, or 12% of the company, and has pledged to retain its shares in a staggered 15-month lockup. The deal is expected to close in September.

When the deal closes, Vivendi's representatives on Activision's board-- including Vivendi CFO and current Activision Chairman Philippe Capron--are expected to step down, people familiar with the matter said.

Laid low by struggles at its main telecommunications unit, Vivendi has begun selling off stakes in various companies to pay down debt and help refashion itself into a leaner media company. The French conglomerate took its controlling stake in 2008 as Activision merged with Vivendi's games unit, which at the time included Blizzard Entertainment. Activision's sales have since grown, to $4.9 billion in 2012 from $4.3 billion in 2009.

Friday's deal had been the subject of tough negotiations leading up to board meetings this week at Vivendi and Activision. Vivendi has been discussing pushing for a dividend of over $3 billion from Activision as recently as earlier this week, according to people familiar with the matter. The two companies have also discussed a share transaction since at least last year.

The Paris-based company, which controlled a majority of Activision's board, in early July got the power to force certain actions over the objections of independent Activision directors, according to securities filings.

Activision separately also released preliminary second fiscal quarterly results. The company said it expects to report earnings per share of 28 cents on $1.05 billion in sales.

Excluding items such as deferred revenue, the company said it expects to report earnings of 8 cents per share on $608 million in revenue. Analysts on average had been expecting earnings of 5 cents per share on $601.1 million in sales.

The Activision deal caps a big week of deal making for Vivendi, which Tuesday announced that it had entered negotiations with Emirates Telecommunications Corp to sell control of African phone operator Maroc Telecom for EUR4.2 billion ($5.6 billion). All told, the two deals could give Vivendi more than EUR10 billion in cash by the end of the year.

Write to Ian Sherr at [e-mail]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires