Activision Reclaims Vivendi’s Majority Stake With Management Led Buy Back

Activision Blizzard (NASDAQ:ATVI) has announced that it will buy back 429 million company shares from Vivendi for $5.83 billion. ^[1] In addition, Activision’s CEO, Bobby Kotick and Co-Chairman Brian Kelly will buy back 172 million company shares from Vivendi for approximately $2.34 billion in cash through an investment vehicle, ASAC II LP. After the completion of the transaction Vivendi, after five years of being the majority shareholder, will just retain a 12% stake in Activision while ASAC II LP will own around 25%.

Activision will fund the transaction through $4.6 billion of debt proceeds and $1.2 billion of cash in hand. The deal is expected to close by the end of the third quarter of 2013 and will leave Activision with around $3 billion in cash and a net debt balance of $1.4 billion. The company expects an earnings per share (EPS) accretion of around 18% to 29% on a GAAP basis and 23% to 33% on a non-GAAP basis for the year as a result of the new share count and capital structure.

Activision and ASAC II LP will pay $13.60 per share, at a discount of 10% to the stock’s closing price at the end of Wednesday. Our price estimate for Activision’s stock is $15, in-line with the current market price. We will modify our model once the transaction has been completed.

See our complete analysis of Activision’s stock here

Earnings Preview

Activision also announced that it will report earnings for the second quarter of 2013 on August 1 and expects GAAP net revenue of around $1.05 billion and Non-GAAP net revenue of $608 million. The GAAP EPS is expected to be around $0.28 while its Non-GAAP equivalent will be around $0.08.

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1. Company to Buy Back Approximately 429 Million Shares from Vivendi for $5.83 Billion [↩]