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Activision Takes on a Mega-Merger

SAN FRANCISCO -- Video-games publisher Activision's (ATVI - Get Report) blowout fourth-quarter result has crowned the company the star of the industry but the company's biggest challenge lies ahead.

Over the next few weeks, Activision hopes to close its merger with Vivendi Games that will create a new $18.8 billion entity called Activision Blizzard.

The challenge for Activision will be to integrate the two companies successfully and leverage the opportunities available to the combined entity without changing their creative structure, says Thomas Tippl, the company's chief financial officer.

"Going into the merger we are very aware that the odds are stacked against you," said Tippl in an interview with TheStreet.com. "But what is different is this case we are combining two best companies in the business."

Activision announced in December its plans to combine with Vivendi Games which includes Blizzard Entertainment and its biggest multi-player online role-playing game, World of Warcraft to create a new company.

Activision decided to court Vivendi because of its strong presence in online games. The two companies talked for more than six months before deciding to merge. According to Activision, the new entity -- Activision Blizzard --would have about $3.8 billion in combined calendar 2007 revenue and among the highest operating margins in the industry.

Tippl said it is a rare merger where both companies are coming from a position of strength. "We don't have business problems to fix here," he said. "We have two very fast growing, profitable business and we have to continue to execute the strategies that are working for us."
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