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Activision Blizzard goes independent as Kotick leads $8.2 billion buyout

Activision Blizzard goes independent as Kotick leads $8.2 billion buyout

Fri 26 Jul 2013 4:36am GMT / 12:36am EDT / 9:36pm PDT
BusinessFinancial

Kotick and Kelly form separate investment group with Tencent as publisher also buys shares

Activision Blizzard is to become an independent company as CEO Bobby Kotick leads an investor buyout from Vivendi worth $8.2 billion.

The publisher of World of Warcraft and Call of Duty will buy 439 million shares from Vivendi for $5.83 billion. In addition, an investment group led by Kotick and co-chairman Brian Kelly, will purchase 172 million shares worth $2.34 billion.

With Vivendi no longer a major stakeholder, Activision Blizzard becomes an independent company led by Kotick and Kelly, whose investment group also includes Chinese operator Tencent, Davis Advisors and Leonard Green & Partners.

"These transactions together represent a tremendous opportunity for Activision Blizzard and all its shareholders, including Vivendi," said Kotick.

"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 $3 billion cash on hand to preserve financial stability."

Kotick added, "Our successful combination with Blizzard Entertainment five years ago brought together some of the best creative and business talent in the industry and some of the most beloved entertainment franchises in the world, including Call of Duty and World of Warcraft. Since that time, we have generated over $5.4 billion in operating cash flow and returned more than $4 billion of that to shareholders via buybacks and dividends. We are grateful for Vivendi's partnership through this period, and we look forward to their continued support."

Kotick's investment group will hold around 24.9 per cent of the company, with Kotick and Kelly investing $100 million combined of their own cash. Vivendi will continue to hold around 12 per cent of shares.

30 Comments

Pandemonium! :)

Posted:A year ago

#1

Abraham Tatester Producer

71 53 0.7
Popular Comment
Given the whole "indie" thing, I think "goes independent" is a poor choice of words. :)

Posted:A year ago

#2

Paul Jace Merchandiser

945 1,433 1.5
Without a doubt the largest and strongest Indie publisher alive. Ok not really but they are still pretty strong.

Posted:A year ago

#3

Murray Lorden Game Designer & Developer, MUZBOZ

202 72 0.4
Good on 'em, best to get away from Vivendi, trying to suck their money away. :)

Posted:A year ago

#4

Steve Peterson West Coast Editor, GamesIndustry.biz

111 73 0.7
I figured it was coming, since they had not yet announced their earnings call. A good move, but it does leave the company with a substantial amount of debt. Shouldn't be a problem if Activision can continue at its current levels of profitability, but the game industry is nothing if not uncertain.

Posted:A year ago

#5

Sean Kauppinen Founder & CEO, IDEA

49 49 1.0
Most people on the business side of games define independent as not being owned by a major entity. By that definition, independent is the correct terminology since Vivendi is a much larger conglomerate than Activision and they are regaining control of their business. Indie developers tend (not always), but tend to place creativity and innovation above marketability. Indie developers also tend to make great creative games for specific defined audiences - this is where we get almost all experimental games. Independent studios and teams tend to make games that consider prevailing tastes among larger portions of potential buyers or payers of a game as they try to remain commercially viable and relevant from a business perspective. Whether it be a work-for hire project they do as a third-party studio, or their own self-funded IP, independents do focus more on the bottom line of keeping their business operating.

Having known Bobby since 1995, I am amazed at how he built that business and has had incredible success. He is probably the best in the business at running a game company in terms of running it as a business. That said, Activision could never "go indie" since they are a public company with shareholders and business objectives that require stability more than the risky projects indies can both imagine and bring to their markets.

It's heartening to see there is an industry that can support all aspects of game creation, regardless of business model or team size, or even budget..

Posted:A year ago

#6

Klaus Preisinger Freelance Writing

1,161 1,228 1.1
Congratulations are in order.

Btw, the new Acti-Blizz: totally indy.

...no, punk

....no wait: rock.

Posted:A year ago

#7

Bruce Everiss Marketing Consultant

1,692 594 0.4
As has been said Bobby Kotick is probably the best businessman the game industry has seen. He has taken Activision from being broke to being worth $8.2 billion.
It is a pity our industry doesn't have more of this sort of skill.

Posted:A year ago

#8

Andrew Goodchild Studying development, Train2Game

1,254 421 0.3
Popular Comment
Bruce, whilst Bobby Kotick is without doubt a very successful CEO, never see how your awe of him sits with your beliefs in regards to everything else.

You keep saying consoles are dead, most of the non-Blizzard side of the business is console based.

You call premium priced games archaic, Activision only seem to release paid titles, at least I've not seen them touch FTP.

You call on the death of physical product for games, not only is AB still mostly invested in physical distribution, with Skylanders they invented physical product DLC.

They only announced any serious effort in mobile last year, and we are yet to see results.

So if he is the best businessman in games, is that not flying in the face of everything you say regarding every other company?

Posted:A year ago

#9

Jean-Marc Wellers Assistant Online Services, Ubisoft

17 7 0.4
I will agree on the Business talent Acti-Blizz has... but the creativity? ... 0.0 I have to pay a closer look

Posted:A year ago

#10

Aleksi Ranta Product Manager - Hardware

288 138 0.5
"It is a pity our industry doesn't have more of this sort of skill."
Pity indeed. Shame though that the suits dont work more on their image towards us, consumers and press :)

Posted:A year ago

#11

Renaud Charpentier Lead Designer, The Creative Assembly

66 144 2.2
Popular Comment
When Blizzard was crafting gems as Starcraft, Warcraft 3, Diablo 2, WoW... they were certainly one of the best studio in the world, and probably the very best on PC. Having played their latest games, including D3, I think they need to reinvent themselves to live up to their legend. Is Kotick the right type of leader to drive a creative rebirth like Steve Job did when he came back to Apple?

Posted:A year ago

#12

Dan Howdle Head of Content, Existent

281 814 2.9
I honestly don't understand why some people are so rough on Activision. They're making some great games that are hugely popular and that a lot of people truly love. When they stop doing that, phone me for a different opinion.

Posted:A year ago

#13
@Dan -
"A man that forgets his history will be constantly cursed to repeat it"
If you do not know the history of Activision then you may need to brush up on this as it will prove pivotal in the coming months after the separation as the company is sitting on a considerable debt which Vivendi has just divested themselves of!

There is a strong danger that Activision could become incredibly vulnerable now they are independent!

Posted:A year ago

#14

Dan Howdle Head of Content, Existent

281 814 2.9
@Kevin

I'm really not interested in people's grudges based on whatever past activity rubbed them personally the wrong way. It's small beer.

Activision is making a lot of great products that a lot of people love.

Posted:A year ago

#15

Morville O'Driscoll Blogger & Critic

1,613 1,476 0.9
@ Dan

"Acti making products that people love" and "Acti having lots of debt and being vulnerable because of it" aren't mutually exclusive. :) Though a quick skip-through their publically-available financials makes me think they're doing better than, say, EA.

Edited 1 times. Last edit by Morville O'Driscoll on 26th July 2013 11:17am

Posted:A year ago

#16

John Donnelly Quality Assurance

313 38 0.1
If Bobby Kotick is so successful why did Activision need to shed so many jobs between 2010 and 2012?
Why also is it that warned on profitability post 2014?

Posted:A year ago

#17

Bruce Everiss Marketing Consultant

1,692 594 0.4
@Andrew Goodchild

I am sure that Kotick will move his properties to where the revenue is.
Look at the vacancies at Freestyle and you can see evidence of that move: http://www.freestylegames.com/careers.php
The word is that The Blast Furnace are working on Call of Duty and Skylanders for mobile. They have been up and running for over a year now with a lot of top talent.

@John Donnelly

If more companies were prepared to shed un-needed staff they would be a lot more successful.
The profit advisory is precisely because console is in decline and there is a transition over to mobile. This creates uncertainty for a company currently deriving significant revenue from console.

Edited 1 times. Last edit by Bruce Everiss on 26th July 2013 11:30am

Posted:A year ago

#18

Andrew Goodchild Studying development, Train2Game

1,254 421 0.3
But that is not were any of their success has come from so far. They are so far unproven in mobile, they have entered it more cautiously than their peers, and have been successful by doing the opposite to everything you say they should have done, at least if they were another company, no?

Posted:A year ago

#19

Morville O'Driscoll Blogger & Critic

1,613 1,476 0.9
The profit advisory is precisely because console is in decline and there is a transition over to mobile. This creates uncertainty for a company currently deriving significant revenue from console.
*cough* New consoles due in a few months! *cough*

Posted:A year ago

#20

Bruce Everiss Marketing Consultant

1,692 594 0.4
@Andrew Goodchild

It is a just a matter of timing. Choosing the moment that the critical mass of mobile justifies the investment of converting major properties to it. Kotick moved over a year ago. Likewise there comes the time when platforms need to be abandoned because they are no longer commercially viable. This too is a matter of timing.
Since 2008 console has polarised onto a small number of massive franchises. Activision just happen (due to Kotick's skill) to own a disproportionate number of these. Mid market games are no longer viable and so he doesn't do these. He has adapted the company to the market magnificently.

@Morville O'Driscoll

Which reinforces my point. The new consoles have a very uncertain future, so add to why the profit advisory was needed.

Posted:A year ago

#21

Morville O'Driscoll Blogger & Critic

1,613 1,476 0.9
@ Bruce

Indeed... I would say it's not how much debt Acti will have after this buy-out that's the problem, but rather how well their franchises succeed on the new consoles. It was definitely the right time for Vivendi to bow-out. All that said, I don't think mobile will help Acti if their console business goes down the pan... It might stave off the inevitable for awhile, but a company the size and weight of Acti can't rely wholesale on mobile; not financially, and not creatively. And it's not like the Blizzard division can easily move WoW, Diablo, StarCraft and Titan to the mobile sector, either.

Posted:A year ago

#22
@Dan -
I am way too old a bunny to have any grudges, stating simple facts that I understand may be a little over your head regarding business discussions. Please don't paint all observations as criticisms or grudges, seems to reflect more on your limitation to look beyond the last press release, or media junket.

Posted:A year ago

#23

John Bye Senior Game Designer, Future Games of London

484 456 0.9
Bruce - "Since 2008 console has polarised onto a small number of massive franchises. Activision just happen (due to Kotick's skill) to own a disproportionate number of these. Mid market games are no longer viable and so he doesn't do these."
As you say, that whole midsection of the market has collapsed over the last few years, taking a lot of development studios (not least here in the UK) and a few publishers with it. But Activision haven't really stopped making low and mid range games, they just get overshadowed by the two or three massive blockbuster titles they pour all their development and marketing money into each year.

For example, over the last year, alongside big titles like Call of Duty and Skylanders, Activision's releases also include -

- The Walking Dead: Survival Instinct
- Transformers Prime: The Game
- Ice Age: Continental Drift
- Wreck It Ralph
- 007 Legends

All of which were mauled by reviewers and were probably developed on a shoestring budget that made critical failure all but inevitable. They've also done a couple of better received mid-range games, Deadpool and Transformers: Fall of Cybertron, which got decent if unspectacular review scores, but don't seem to have sold any better for that. It's hard to see how most of those games could have made a profit, despite the low budgets involved. So why do they keep putting (even small amounts of) money into them?

Posted:A year ago

#24

Sean Kauppinen Founder & CEO, IDEA

49 49 1.0
They have been cautious in mobile, but they also completely avoided the social games bubble while growing their business.

Posted:A year ago

#25

David Serrano Freelancer

300 272 0.9
These transactions together represent a tremendous opportunity for Activision Blizzard and all its shareholders, including Vivendi, said Kotick.
A tremendous opportunity for Activision Blizzard execs and all its shareholders... not for the employees. So as usual, all of the wealth generated by the work of other people will flow into the hands of execs and shareholders.

Posted:A year ago

#26
@ Andrew / Bruce

Are you guys seriously discussing the decline of console games one quartal away from next gen?

Edited 2 times. Last edit by Konstantin Hohl on 26th July 2013 7:32pm

Posted:A year ago

#27

Andreia Quinta Creative & People Photographer, Studio52 London

228 631 2.8
I'm more interested in seeing when (and if) Blizzard decides to ditch Activision and go back to their roots, I used to be very adamant in defending the Blues, but lately with all the Diablo III controversy and micro-transactions in WoW bordering on pay-to-win as of late I'm starting to be concerned if my favourite PC focused company will be Valve instead of Blizzard in 5 years time.

Edited 1 times. Last edit by Andreia Quinta on 26th July 2013 10:33pm

Posted:A year ago

#28

Andrew Goodchild Studying development, Train2Game

1,254 421 0.3
@Konstantin
Are you guys seriously discussing the decline of console games one quartal away from next gen?
As far as I am aware, I was not discussing decline of console games at all (at least not directly, and not with any of my view on the matter), even if the reply to my question involved Bruce mentioning his stance on that.

I was discussing what I percieve as an inconsistancies in Bruce's regards to Activision Blizzard with regards to his comments on every other company.

Edited 2 times. Last edit by Andrew Goodchild on 27th July 2013 7:47am

Posted:A year ago

#29

Dominic Jakube Student

92 13 0.1
Good on him, everyone wants to be their own boss, but there is an elelment of risk, the traditional console tranistion phase is not very friendly to developers or publishers bottom line, World of Warcraft is down to 7Mill subs and seams to be finally winding down,Blizzards replacement MMO is MIA and Disney is gunning for that Skylanders honey pot with all their considerable IP's and could in the future leverage the massive fanbase of properties like Marvel and Star Wars.

Still 8 Billion He must be doing something right.

Posted:A year ago

#30

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