Vivendi, Activision to create computer games giant

European media group Vivendi plans to acquire a majority stake in leading computer games publisher Activision and merge the company with its own gaming unit to form what will likely be the world's largest third-party publisher of computer games.

The deal, announced Sunday, will create a new company, Activision Blizzard, that will boast two of the most popular computer games as part of its catalog: Activision's console-based Guitar Hero and Blizzard's massive multi-player online role playing game (MMORPG) World of Warcraft. Other Activision titles include Call of Duty, the Tony Hawk series and Spider-Man while Blizzard titles include the hit games Starcraft, Warcraft and Diablo.

It also brings together Activision's power on the console and PC platforms with Vivendi's strength online. Vivendi has over 9 million subscribers to its online gaming community.

Under the terms of the deal Vivendi acquire a 52 percent stake in Activision through a mixture of $1.7 billion in cash and shares valued at $8.1 billion of its Vivendi Games unit. Within five business days of the transaction's closing, the new company will launch a tender offer to buy back around $4 billion worth of Activision Blizzard common stock.

The tender will leave Vivendi with a stake of between 52 percent, assuming zero subscription, and 68 percent, assuming full subscription. The remaining stake will be owned by Activision shareholders.

Activision Blizzard will have pro forma 2007 revenue of $3.8 billion, which likely puts it ahead of leading game software publisher Electronic Arts. EA reported revenue of $3.1 billion for its most recent financial year.

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