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Activision breaks free of Vivendi with $8 billion buy back: Jeff Beer

Call of Duty and World of Warcraft maker now safe from parent company's debt.

CB world of warcraft 665Video game giant Activision Blizzard announced Friday that it has bought itself back from parent company Vivendi for US$8.2 billion. The deal will drop the France-based, soon-to-be-former parent company’s stake to 12%, down from 61%. Activision itself is buying back US$5.83 billion worth of stock, while the investment group led by Activision CEO Bobby Kotick and Co-Chairman Brian Kelly will buy an additional US$2.34 billion.

Activision stock jumped 14% Friday morning, a reflection of what most observers say is a positive move for the company to get out from under the heavily debt-laden Vivendi. In 2007, Vivendi merged its own video game company Blizzard with Activision in a US$18.9 billion deal. Today, Activision Blizzard’s market cap is at US$19.56 billion. Reports earlier this month speculated Vivendi would take out loans against Activision to pay down some of its debt, a move many said would make the home of such blockbuster game franchises like Call of Duty and World of Warcraft financially vulnerable despite it reporting more than US$4 billion in cash. By getting out from under its parent company’s massive piles of debt, Activision seems to have dodged a bullet.

CEO Kotick said in a statement, “We should emerge even stronger – an independent company with a best-in-class franchise portfolio and the focus and flexibility to drive long-term shareholder value and expand our leadership position as one of the world’s most important entertainment companies… The transactions announced today will allow us to take advantage of attractive financing markets while still retaining more than US$3 billion cash on hand to preserve financial stability.”

R.W. Baird analyst Colin Sebastian told GamesBeat, “Seems like the deal should be a win-win … Activision gets its independence, Vivendi gets sorely needed cash, and Activision shareholders get earnings accretion.”