Vivendi, Activision Deal Creates Video Gaming Giant

SANTA MONICA/PARIS, December 3: Vivendi is taking a
controlling stake in Activision in a deal intended to create the world’s largest
pure-play video game publisher.

Under the terms of the agreement, Vivendi Games will be
merged with a wholly owned subsidiary of Activision. Shares of Vivendi Games
will be converted into 295.3 million new shares of Activision common stock.
Based on the transaction price of $27.50 per share of Activision common stock,
this implies a value of approximately $8.1 billion for Vivendi Games.
Concurrently with the merger, Vivendi will purchase 62.9 million newly issued
shares of Activision common stock at a price of $27.50 per share—a
premium of 31 percent to Activision’s average closing price over the past 20
trading days—for a total of $1.7 billion in cash. As a result of these
transactions, Vivendi will own an approximate 52 percent ownership stake in
Activision Blizzard on a fully diluted basis. Within five business days after
closing the transaction, Activision Blizzard will launch a $4 billion all-cash
tender offer to purchase up to 146.5 million Activision Blizzard common shares
at $27.50 per share. The tender offer will be funded by Activision Blizzard’s
cash on hand at closing, including the $1.7 billion in cash received from the
Vivendi share purchase. In addition, Vivendi has agreed to acquire from
Activision Blizzard additional newly issued shares for up to an additional $700
million of Activision common stock at $27.50 per share, the proceeds of which
would also be used to fund the tender offer. Any remaining funds required to
complete the tender offer will be borrowed by Activision Blizzard from Vivendi
or third-party lenders. If the tender offer is fully subscribed, Vivendi will
own an approximate 68 percent ownership stake in Activision Blizzard on a fully
diluted basis.

Activision Blizzard is expected to have approximately $3.8
billion in revenues in 2007 and the highest operating margins of any major
third-party video game publisher. Activision’s titles include Guitar Hero, Call of Duty and the Tony Hawk series,
as well as Spider-Man, X-Men, Shrek,
James Bond and TRANSFORMERS. Blizzard Entertainment, a division of Vivendi
Games, owns the leading multi-player online role-playing game franchise, World
of Warcraft, which currently has over 9.3
million subscribers worldwide. Vivendi Games also owns popular franchises,
including Crash Bandicoot and Spyro.

Jean-Bernard Lévy, the chairman of the management board and
CEO of Vivendi, stated: “This alliance is a major strategic step for Vivendi
and is another illustration of our drive to extend our presence in the
entertainment sector. By combining Vivendi’s games business with Activision, we
are creating a worldwide leader in a high-growth industry. We are excited about
the opportunities for Activision Blizzard as a broader entertainment software
platform. We believe this transaction will create significant value for
Activision Blizzard and Vivendi stockholders. In Activision, we have found a
partner with a highly complementary business and strong operating team. Bobby
Kotick and Brian Kelly are industry pioneers, well known for creating
shareholder value. The combined strength of the existing management teams at
both companies will set the stage for further profitable growth of Activision
Blizzard. We look forward to being an active and supportive majority
stockholder in a company that is poised to lead the worldwide interactive
entertainment industry in the years ahead.”

Robert Kotick, Activision's chairman and CEO, added: “This
is an outstanding transaction for Activision and our stockholders, as well as a
pivotal event in the continuing transformation of the interactive entertainment
industry. By combining leaders in mass-market entertainment and
subscription-based online games, Activision Blizzard will be the only publisher
with leading market positions across all categories of the rapidly growing interactive
entertainment software industry and reach the broadest possible audiences. By
joining forces with Vivendi Games, we will become the immediate leader in the
highly profitable online games business and gain a large footprint in the
rapidly growing Asian markets, including China and Korea, while maintaining our
leading operating performance across North America and Europe. Activision
stockholders will benefit from significantly increased earnings power and the
recurring nature and predictability of subscription-based revenues, while also
having the opportunity, if they choose, to receive $27.50 per share for a
portion of their shares in the post-closing tender offer.”

Kotick continued: “Vivendi Games provides Activision with
unique strategic and financial benefits and will allow us to leverage our
franchises into emerging online opportunities as Blizzard has done so
successfully. Activision has been very
focused on margin expansion, and this transaction will meaningfully increase
our overall operating margins as we expand our franchises online and in new
geographies. Diversifying our revenue base among subscription-based online,
console and PC formats, as well as wireless and casual emerging opportunities,
gives us the broadest platform to capitalize on industry growth. With
Blizzard’s successful franchises, such as World of Warcraft, StarCraft and an exciting pipeline of yet-to-be announced titles, Vivendi Games’
and Blizzard’s management team will join with Activision’s strong and
experienced leaders to become an even more powerful force for innovation in
online and offline interactive entertainment across a wide range of platforms.
This transaction also provides a unique relationship with Universal Music
Group—the world’s largest music company—which will benefit Guitar
Hero and further extend our sizable
leadership position in music-based games.”

Kotick will be president and CEO of Activision Blizzard.
Bruce Hack, current CEO of Vivendi Games, will serve as vice-chairman and chief
corporate officer of Activision Blizzard, accountable for leading the merger
integration and the finance, human resources and legal functions. Mike Griffith
will serve as president and CEO of Activision Publishing, which after closing
will include the Sierra Entertainment, Sierra Online and Vivendi Games Mobile
divisions in addition to the Activision business. Mike Morhaime will continue
to serve as president and CEO of Blizzard Entertainment. Thomas Tippl,
currently CFO of Activision, will be appointed CFO of Activision Blizzard and
Jean-François Grollemund, currently CFO of Vivendi Games, will be appointed
chief accounting officer of Activision Blizzard.

Pending regulatory and stockholder approval, the companies
expect the transaction to be completed in the first half of calendar year 2008.

—By Mansha Daswani