Vivendi is buying a controlling stake in Activision for US$9.8 billion ($12.8 billion) to create the world's largest maker of video games.
Vivendi will contribute its US$8.1 billion video-game business and pay US$1.7 billion in cash for a 52 per cent stake in the combined company, Vivendi andActivision said yesterday.
The merged company, called Activision Blizzard, will bring together Vivendi's top-selling online game World of Warcraft with the Guitar Hero and Call of Duty franchises owned by Activision.
The venture will have about US$3.8 billion in sales this year, the companies said, surpassing market leader Electronic Arts.
"There is a competitor now to Electronic Arts," said Michael Pachter, an analyst at Wedbush Morgan Securities in Los Angeles. "There is no more clear No 1 and clear No 2 company.
"There are now two guys that are dominant."
The new company will make an offer to buy back as much as $4 billion in shares at $27.50 each, or 24 per cent more than Activision's closing price on November 30.
Activision Blizzard firm will trade on the Nasdaq Stock Market under Activision's ATVI symbol. The new company is aiming for operating income of US$1.1 billion next year.
Activision chief executive Robert Kotick will stay in his role at Activision Blizzard. Bruce Hack, chief executive of Vivendi Games, will become vice-chairman and lead the integration.
Last month, Activision raised its profit and sales forecasts for the quarter on demand for its latest Guitar Hero game. Guitar Hero III: Legends of Rock, released in October, was last month's best-selling title for Nintendo's Wii and Sony's PlayStation 2 and PlayStation 3 consoles.
The global video-game industry is expected to grow an average of 9.1 per cent annually to reach US$48.9 billion in 2011.
