Vivendi SA is about to buy a controlling stake in Activision Inc., a major player in the gaming industry. A couple of big properties of Activision and Vivendi are the World of Warcraft and Guitar Hero.
The offer by Vivendi of $27.50 a share will buy it 68 percent of Activision, and values the whole company at $8 billion.
Vivendi will take its existing gaming division, enfold it into Activision, and put up cash to form a new company called Activision Blizzard. Current Activision CEO Robert Kotick will be the CEO of "Blizzard."
Vivendi's Chief Executive Jean-Bernard Levy said concerning the acquisition that "Gaming is now a core business for Vivendi. The match of the two companies is amazingly powerful, and it will immediately create a new leader in videogaming world-wide."
The company has a goal of growing to $1.1 billion in operating income by the end of 2009.
Electronic Arts is the industry leader and major competitor the new company will face. Analysts like Michael Pachter from Wedbush Morgan Securities believes this will force EA into being more aggressive with their Internet strategies, saying, "If they want to hold these guys off, they're going to have to get more active in online."
The acquisition and merger will actually make Ativision Blizzard larger in combined pro forma revenue, which is estimated to reach 3.8 billion this year. Electronic Arts projects about $3.2 billion in revenue for 2007.
Of course just merging and buying larger revenue won't make them successful in and of itself. But with the basics in place, it will probably force Electronic Arts and Blizzard to be better companies. That's good news for consumers.
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