Activision Blizzard (NASDAQ:ATVI) has announced that it will buy back 429 million company shares from Vivendi for $5.83 billion.  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.
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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.Notes: