Activision Blizzard buys itself back from Vivendi, becomes world’s biggest “indie”
Things we did not expect to see upon waking up this morning: Activision Blizzard is now an independent company.
The company is buying approximately 429 million shares of itself back from parent company Vivendi for $5.83 billion in cash. Activision Blizzard CEO Bobby Kotick and Brian Kelly have invested a combined $100 million personally through ASAC II LP, an investment “vehicle” that that is purchasing 172 million shares of the company.
This move makes Activision Blizzard an independent company, with the majority of shares owned by the public. Vivendi will retain around 12 percent of the company.
A giant bet on itself
“The Company will be led by Bobby Kotick as Chief Executive Officer and Brian Kelly as Chairman. Vivendi will no longer be the majority shareholder, but will retain a stake of 83 million shares or approximately 12 percent,” the press release states. “ASAC II LP-the investor group which, in addition to Kotick and Kelly, includes Davis Advisors, Leonard Green & Partners, L.P., Tencent, as well as one of the largest global institutional investors-will own a stake of approximately 24.9 percent.”
So what does this mean for the company, and for gamers? It’s hard to say, but Activision Blizzard was operating minimal debt and substantial cash reserves. This made the company a substantial asset for Vivendi, and it was widely reported that Vivendi was planning to force Activision to pay out some of that cash in special dividends. In other words, Activision Blizzard would be forced to lose some of its cash reserves in order to help the balance sheet of its parent company.
This deal isn’t exactly perfect for Activision Blizzard, the company will now carry around $1.4 billion of net debt, but the trick is that the investors received something in return for that money: The company itself. Activision Blizzard is no longer in danger of becoming Vivendi's piggy bank on an ongoing basis.
“It is a substantial and gutsy move by Activision but also an eminently sensible one given the alternatives Activision faced,” Nick Gibson, an analyst with Games Investor Consulting, told The Guardian. “Vivendi's majority stake combined with its own balance sheet difficulties could have resulted in raids on Activision's cash reserves – by forcing Activision to pay out large-scale special dividends – or other actions that might have jeopardized Activision's ability to operate.”
The debt is problematic, sure, but now the company gets to be the master of its own destiny, and with the launch of Call of Duty Ghosts this year, not to mention the gigantic, long term investment in the Bungie-developed Destiny… well, Activision Blizzard is rarely afraid to go big.
Activision Blizzard's booth at E3 was a mastery of messaging, focusing on four blockbuster titles, each aimed at a different demographic and market segment. This move means that the company has more to lose if something goes bad, but even more to gain if everything goes according to plan.
Keep in mind use of the word “indie” when referred to Activision Blizzard is going to be a popular joke today and, without a parent company owning the majority of shares, you could argue that the tag fits in some ways. The reality is that the company is now more beholden to shareholders than ever, however, and now carries substantial debt. The next few years will certainly be an interesting ride.