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