* Vivendi to retain 12 pct stake in Activision
* Some of sale proceeds to pay down debt, rest unknown
* Move follows Maroc Telecom disposal, network-sharing deal
* Activision becomes independent again in management buyout
By Christian Plumb and Leila Abboud
PARIS, July 26 Vivendi agreed to sell
most of its stake in Activision Blizzard, the world's
largest videogames publisher, for $8.2 billion on Friday, paving
the way for a broader split of the French conglomerate's media
and telecoms assets.
Vivendi has been looking to sell assets since Chairman
Jean-Rene Fourtou said 18 months ago there would be no taboos as
it tried to make sense of a diverse portfolio built up in a
frantic spending spree under a former CEO Jean-Marie Messier in
the late 1990s.
Even so, since the company's aim is to forge a leaner
media-focused group, the sale of Activision Blizzard, the
largest and most profitable of its entertainment businesses,
came as a surprise, as did the price.
Vivendi is selling the shares in Activision, best known for
online multiplayer games World of Warcraft and Call of Duty, for
$13.60 each, a 10 percent discount to Thursday's closing price.
Chief Financial Officer Philippe Capron said there was too
little synergy between video games and its music and pay-TV
Shares in Vivendi, which was a water company for most of its
160-year history before it spread its wings in the 80s and 90s,
have long suffered from a 15-20 percent "conglomerate discount"
that reflects investors' lack of enthusiasm for its ill-fitting
collection of businesses.
"The board decided the ambitions we have in media did not
necessarily require us to hang on to Activision," Capron said.
The company said it would use part of the proceeds to pay
off some of its 13.2 billion euros of debt.
Vivendi's ongoing effort to sell its stake in Maroc Telecom
to Abu Dhabi-based Etisalat for 4.2 billion euros,
announced on Tuesday, will also cut debt.
Since a heavy debt load would have interfered with any plans
to spin off French mobile phone operator SFR, Vivendi could
finally act on that goal. Capron said Vivendi was now doing a
feasibility study on splitting SFR from the rest of the group,
which includes Universal Music Group, pay-TV business Canal Plus
and Brazilian telecom GVT.
"The disposal will deleverage the group and give us
significant financial flexibility that can be put to several
possible uses, including splitting off SFR," he said.
He added that a sale of Brazilian telecom group GVT, which
failed last year, could be revived. "That would leave us to
start regrowing a media-focused group again around Universal
Music and Canal."
It is keeping a 12 percent stake, down from 61 percent, and
selling the rest back to the company and to an investor group
led by the games maker's Chief Executive Bobby Kotick and
Co-Chairman Brian Kelly.
Activision shares were up 2 percent in New York, while
Vivendi stock closed up 0.5 percent at 16.07 euros, having
initially risen nearly 5 percent.
The sale is the fruit of months of talks between the parent
company and the management of the video games maker led by
long-time boss Bobby Kotick.
In December, they formed a special committee of Activision's
independent directors to study how to handle $4.3 billion in
cash sitting on the video games maker's balance sheet, according
to three sources close to the talks.
Vivendi wanted access to the cash via a dividend or share
sale. But Kotick soon told the committee that he was interested
in taking back control of the company after six years under
The talks, dubbed "Project Khaleesi" after a queen on HBO
series Game of Thrones, wavered between the dividend and sale
options. For Kotick, securing the financial backing for the deal
was not easy, a person close to the talks said, but once he had,
Vivendi presented two options to its board.
"The vote was unanimous, even though Vivendi is not getting
a change of control premium from the sale of the stake," said a
person close to the situation.
"Selling out was the better option because it allows
dramatic debt reduction."
Activision said early on Friday it would buy back 429
million shares from Vivendi for $5.83 billion.
An investor group led by Kotick and Co-Chairman Brian Kelly
will separately purchase about 172 million Activision shares
from Vivendi for $2.34 billion.
The consortium, which will own 24.9 percent of Activision,
includes Davis Advisors, Leonard Green & Partners, Chinese web
portal Tencent, and investment fund Fidelity Investments.
Kotick, on a call with analysts, emphasised how accretive to
earnings per share the deal would be, as well as its tax
"We expect to emerge from this transaction even stronger
than we are today," he said.
Activision said it was advised by J.P. Morgan Securities LLC
and law firm Skadden, Arps, Slate, Meagher & Flom LLP.
Vivendi was advised by Goldman Sachs and Barclays, according
to people familiar with the matter.