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Activision Blizzard & Robert Kotick Led Investment Group Put Up US$8.2 Billion to Buy Back Control From Vivendi

Bobby_Kotick wikipedia

Bobby Kotick / Wikipedia

/By Albert Hecht/

Activision Blizzard and an investment group led by its Chief Executive Officer Robert Kotick announced on Thursday a deal to buy out a big portion of French parent company Vivendi SA’s controlling stake in the biggest U.S. video-game developer, publisher of the World of Warcraft and Call of Duty, the online gamer’s favorites for a total of US$8.2 billion.

The company itself will 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. Kotick and his partners, who include Activision Co-Chairman Brian Kelly, Chinese video-game publisher Tencent Holdings Ltd., Davis Advisors and Leonard Green & Partners, will pay $2.34 billion for another 172 million of Vivendi’s shares of Activision.

On concluding the transaction Kotick and his investment group will own 24.9% of Activision Blizzard and Vivendi will continue with a residual 83 million shares for an approximately 12% holding – plus the US$8.2 billion of cash they will receive from the transaction. Kotick and Kelly have been partners in Activision Blizzard since they joined the company in 1990. After the deal was announced Robert Kotick issued a statement saying that the buy-out deal represented “a tremendous opportunity not only for Activision Blizzard but for all our new partners and also for existing shareholders.”
“Activision would now be regarded as an independent company with a best-in-class franchise portfolio and the focus and flexibility to drive long-term shareholder value and expand our leadership position as one of the world’s most important entertainment companies”. Kotick summed up.

After months of confidential negotiation, the buy-out agreement transaction was finally sanctioned at a board meeting in California a few days ago. On Friday the market reacted positively to the news, Activision Blizzard’s shares rose considerably and closed for the day at a price of US$17.46 – an increase of almost 15%.

Activision has long been regarded as Kotick’s baby, with he and his partner and co-chairman Brian Kelly having held the reins of the company for more than 20 years. In 2008, Kotick was responsible for combining Activison’s portfolio of gaming titles, specifically designed to suit consoles and handheld devices with Blizzard, a previously Vivendi-owned games business whose particular products were geared towards play on a personal computer, especially online subscription games. The merger also gave Vivendi control of the company at that time.

That amalgamation proved to be a master stroke, with Kotick pointing out since the amalgamation Activision Blizzard has succeeded in generating close to $5.5 billion in operating cash flow, with a commendable $4 billion of that being returned to the company shareholders, either through stock buybacks or dividends.

“Our successful combination with Blizzard Entertainment five years ago brought together some of the best creative and business talent in the industry and some of the most beloved entertainment franchises in the world, including “Call of Duty and World of Warcraft.” ” Kotick went on to explain.

According to industry analysts, Vivendi will benefit a number of ways from the buy out. Not only will they enjoy a considerable input of capital that will allow for debt reduction, at the time when the company is in the throes of a major reconstruction program. With this deal now signed and sealed Vivendi also stand to reap substantial tax benefits as well: as part of the deal Activision will also acquire “certain tax attributes” from Vivendi, in particular being able to offset past losses against taxes on future profits.

Activision currently has around 8 million subscribers for their World of Warcraft program, a drop of around 20% since the beginning of the year, possibly as a result of the already recognize swing away from desktop computers to mobile.

Despite the downturn Activision Blizzard actually raised its full-year revenue outlook from $4.22 billion to $4.31 billion, while predicting that earnings per share would be 77 cents, an increase on his previous forecast of 73 cents. In their previous financial year ending December 2012, Activision reported revenue of $4.86 billion with net income for the year of $1.15 billion.

 

Robert Kotick began his career in the online gaming industry in 1983 while still attending the University of Michigan. To subsidize the cost of the studies Kotick took advantage of his considerable programming talents to become a member of the team that many involved in writing software for the Apple II computer. Kotick recalls meeting the late Steve Jobs and that hed adviced him to drop out of college in order to take full advantage of his considerable skills highly developed entrepreneurial interests in the fast-moving software industry of that time.

During the rest of the eighties. Kotick and his partner Brian Kelly were involved in a number of software ventures, generating sufficient experience as well as working capital to acquire a 25% stake in Activision as it then was in December 1990, with Koteck going on to become became CEO of the company in February 1991. In 1995, Koteck and Kelly led Activision to the first major merger, when they acquired International Consumer Technologies.

Since February 2012 Kotick has served as a director of The Coca-Cola Company, performing his role with the company in perfect conjunction with that at Activision Blizzard.

In addition, in his spare time, Bobby Kotick currently acts as a board member for the Center for Early Education, the Los Angeles County Museum of Art, and the Tony Hawk Foundation.

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