Activision Blizzard Gets Stockholder Approval

Activision announced today that at a special meeting of stockholders it received the required stockholder approval to complete the proposed merger with Vivendi Games. The proposals received more than 92 percent of the shares voted, and the transaction is expected to close on July 9.

Under the terms of the deal, Vivendi will receive about 295.3 million newly issued shares of Activision common stock. Vivendi will also purchase around 62.9 million newly issued shares of Activision common stock at a price of $27.50 per share for a total of approximately $1.7 billion in cash. This means that Vivendi will control a 52 percent ownership stake in the newly formed Activision Blizzard, which will continue to be traded on Nasdaq under the familiar ATVI ticker.

The merger immediately creates a new "top dog" in the game industry. The deal values the new Activision Blizzard at $18.9 billion, whereas rival EA's market capitalization after Monday's market close stood at $14.1 billion.

"What it does is create a (first) truly global gaming company with reach in the U.S., Europe and Asia," commented Edward Williams, an analyst with BMO Capital Markets, to Hollywood Reporter. "It also creates a company that drives revenue from multiple streams, including the massively (multiplayer) online game category that is seeing the biggest growth."

More importantly, a number of analysts believe that Activision Blizzard is poised for greater earnings growth, while EA's numbers have slipped somewhat. "I don't care about who is No. 1 and 2," Hudson Square Research analyst Daniel Ernst noted. "Earnings growth is what counts for investors."

Activision Blizzard is expected to have the highest margins in the industry. "There is potential for the combined entity to reach 30%-plus operating margins," which easily tops the more common operating margins in the 10%-20% range, explained Sterne, Agee & Leach analyst Arvind Bhatia.