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Activision Blizzard formation set for July 8

By Phil Elliott

Wed 11 Jun 2008 11:26am GMT / 7:26am EDT / 4:26am PDT

New super-publisher will be the world's most profitable videogames publisher, says Lazard Capital

Activision Publishing

Activision, Inc. is a leading international publisher of interactive entertainment software products....

The official merger of Activision and the Vivendi games unit, including World of Warcraft publisher Blizzard, is set to complete on July 8 and will become the world's "most profitable" interactive entertainment company, according to Lazard Capital analyst Colin Sebastian.

In a note received by today Sebastian is raising the company's target price from USD 33 to USD 40 per share, with estimated earnings per share of USD 1.45-1.60 through fiscal 2009.

"We believe the transaction is set to create a formidable new digital media powerhouse and the most valuable interactive entertainment company worldwide, unlocking the value of industry juggernaut World of Warcraft, and possibly also setting a new benchmark for profit margins among publicly traded video game pure-plays," he said.

"Based on our revised analysis of the earnings power for the combined Activision Blizzard, we are increasing our price target to USD 40, which is based on 26 times the midpoint of our 2009 estimated combined company earnings per share range, and a 25 per cent premium to the sector, justified in our opinion by comparatively higher operating margins and more stable revenue streams."

The agreement between Activision and Vivendi was first announced last December, and was approved by the European Union in April this year.

Since the news first broke, Electronic Arts has moved to try and challenge the new company by attempting to acquire Take-Two Interactive, although the route has proven complex, and no agreement looks likely for the time being.

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