Activision goes independent

The biggest U.S. video-game publisher Activision has just gone independent after the company and a consortium led by Chief Executive Officer Bobby Kotick bought most of Vivendi SA’s stake in the company at a 10 percent discount.

Activision purchased 429 million of its own shares back from Vivendi for $5.83 billion (at $13.60 per share) and Kotick and his partners bought 172 million shares worth $2.34 billion (at $13.60 per share).

The French company had a 61% controlling stake in Activision for over five years. However, Vivendi is now aiming to transform itself into a smaller media company.

“It was a complex negotiation and a long negotiation. This generates a lot more cash, and creates more flexibility for Vivendi, even if it means we’re giving up our majority position within the company.”

Kotick told Bloomberg news: “We tried to construct a transaction that rewarded our public shareholders and this structure accomplishes that.”

Following becoming an independent company Activison nearly achieved a five-year high – the company now has a market value of $17 billion.

Colin Sebastian, an analyst at Robert Baird & Co, said:

“This looks like a win, win, win for Activision, Vivendi and Activision shareholders. 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.”

The statement says that Activision will fund the buyback with $4.6 billion in debt and $1.2 billion in domestic cash, with financing from JPMorgan Chase & Co. and Bank of America-Merrill Lynch.

Michael Pachter, at Wedbush Securities in Los Angeles, said that “they generate about $1.1 billion in cash a year, so it’ll probably take them about four years to pay off the debt.”

In related news, Activision is known for taking stringent actions against players who violate their terms of service, players do have the option to file for an ban appeal if they believe that they have been wrongfully penalized, click for more information on how to appeal a Activision ban.

Bloomberg reported that “Kotick’s group and Vivendi weren’t able to strike a deal earlier this year because of differences over price.”