Blizzard/Activision Merges With Vivendi In $18 Billion Deal

The French media conglomerate Vivendi is merging its computer games business with its US-based rival Activision in an $18.9bn (£9.2bn) deal that will create the world's largest computer games company.

The move brings together franchises including the world's most popular online game, World of Warcraft, developed by Vivendi's Blizzard Entertainment, with Activision hits such as Guitar Hero (below right), and the Call of Duty and Tony Hawk franchises.

The two companies hope to create a "next-generation digital entertainment company" from a deal that will see Vivendi hold 52% to 68% of the new company Activision Blizzard, which will leapfrog the market leader Electronic Arts, home to The Sims and Medal of Honor games.

While traditional media such as film, TV and music struggle to adapt to the digital environment, computer games are increasingly using the ability to connect devices to the internet. Advertisers have also become interested in using computer games for their products as game franchises become more popular among young consumers.

The global computer games market is estimated at more than $30bn. Development costs, however, are rising because of the proliferation of gaming consoles - the Xbox, Playstation 3 and Nintendo Wii. Global sales of software for these next-generation consoles are forecast to reach $13.9bn by 2009.

Activision, Inc. (NASDAQ: ATVI) and Vivendi (Euronext Paris: VIV)
today announced that they have signed a definitive agreement to
combine Vivendi Games, Vivendi's interactive entertainment business --
which includes Blizzard Entertainment's(R) World of Warcraft(R), the
world's #1 multi-player online role-playing game franchise -- with
Activision, creating the world's largest pure-play online and console
game publisher. The new company, Activision Blizzard, is expected to
have approximately $3.8 billion in pro forma combined calendar 2007
revenues and the highest operating margins of any major third-party
video game publisher. On closing of the transaction, Activision will
be renamed Activision Blizzard and will continue to operate as a
public company traded on NASDAQ under the ticker ATVI.

Q: What will change with regard to the day-to-day operations at Blizzard?

A: There will be no changes in the way Blizzard operates. All of the people, processes, and philosophies that have made Blizzard so successful will be preserved. Blizzard will benefit from all-star sales and distribution teams to service our products. In addition, the combined company will be stronger financially, managerially, and operationally.