SAN FRANCISCO, July 26 Activision Blizzard Inc's CEO, who is shelling out $50 million of his own money in an $8.2 billion deal to buy back most of Vivendi's stake, said the world's largest video game publisher will be freer to pursue acquisitions and grow after emerging from its French parent's wing.
Bobby Kotick, one of the highest-paid and longest-running corporate chief executives in an industry that has been ravaged in recent years by the rise of casual and mobile gaming, told investors on a Friday conference call he thinks the company will be stronger as a result of the deal.
Activision shares surged 15 percent to $17.45, the highest since September 2008, in afternoon trading on Nasdaq.
As an independent company, Activision will have "the focus and flexibility to drive long-term shareholder value," Kotick said. "The importance of this transaction is that it gives us the opportunity to really reward our public shareholders and you see that in the accretion."
Vivendi agreed on Friday to sell most of its stake in the publisher of the blockbuster "Call of Duty" franchise for $8.2 billion, paving the way for a broader split of the French conglomerate's media and telecoms assets.
The deal, which will reduce the French firm's stake to 12 percent from 61 percent, fulfills Kotick's longstanding wish to buy back the company he had built into a games powerhouse since 1991. Activision merged with Vivendi's games division in 2007.
But the industry is struggling with shrinking demand for videogames as gamers shift away from traditional console titles to mobile games and free-to-play offerings online.
Vivendi is selling the shares in Activision, also known for its "Skylanders" title, for $13.60 each, a 10 percent discount to Thursday's closing price. Analysts said, however, the deal was positive for the company because it removed longstanding uncertainty around how Vivendi would deal with its U.S. unit.
There's no longer "this overhang that this struggling parent company is going to use Activision and its resources to its own benefit to the detriment of Activision's shareholders," R.W. Baird analyst Colin Sebastian said. "That makes the shares worth more."
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 other investors include Davis Advisors, Leonard Green & Partners, Chinese web portal Tencent, and investment fund Fidelity Investments, which will end up owning 24.9 percent of Activision. Tencent, which also offers online games, will be a passive investor and will not have a board seat in the independent company, Kotick said.
Kotick and Kelly will personally invest $50 million each. The CEO received total compensation of $64.9 million last year, making him one of the top-paid U.S. CEOs. He has been a director and CEO of Activision since February 1991.
Activision itself is funding the deal with $1.2 billion in cash and $4.75 billion by raising new debt, Chief Financial Officer Dennis Durkin told analysts. It will also establish a $250 million revolving credit facility, he added.
Kotick and Durkin did not provide details of the company's plans after the deal is completed, which is expected at the end of September.
Bank of America Merrill Lynch and JPMorgan have agreed to finance the deal, the company said.
"You've got a transaction that occurred at a discount and you've got insider buying as well. So when you look at all of that, the combination of it ends up being a positive one for existing shareholder," Ed Williams, an analyst at BMO Capital, said.