Activision Shares Surge on $8.2B Buyout

NEW YORK ( TheStreet) -- Activision Blizzard ( ATVI) shares surged more than 10% in pre-market trading on Friday after the video game giant announced an $8.2 billion deal to split from parent company Vivendi.

The Santa Monica, Calif.-based firm will buy back around 429 million shares from Vivendi for $5.83 billion, or $13.60 a share. An investor group led by Activision CEO Bobby Kotick and Co-Chairman Brian Kelly will also purchase approximately 172 million Activision shares from Vivendi for $2.34 billion, or $13.60 a share.

Activision shares jumped 24.18% to $18.90 before market open.

"These transactions together represent a tremendous opportunity for Activision Blizzard and all its shareholders, including Vivendi," said Kotick, in a statement. "We should emerge even stronger -- an independent company with a best-in-class franchise portfolio and the focus and flexibility to drive long-term shareholder value and expand our leadership position as one of the world's most important entertainment companies."

Kotick and Kelly's investor group, which includes Davis Advisors, Leonard Green & Partners, Tencent and "one of the largest global institutional investors" will own a stake of approximately 24.9% following the buyout. Vivendi will retain a stake of approximately 12% in the new company, which will be led by Kotick as CEO and Kelly as chairman.

The game maker, which publishes the popular Call of Duty and World of Warcraft titles, will fund the acquisition through a combination of approximately $1.2 billion of domestic cash on hand and approximately $4.6 billion of debt proceeds. Bank of America Merrill Lynch ( BAC) and JP Morgan ( JPM) have provided financing for the deal, which is expected to close by the end of September.

Activision also issued its preliminary second-quarter results before market open, forecasting GAAP revenue of approximately $1.05 billion. Excluding items, the company expects revenue of approximately $608 million and earnings of 8 cents a share. Analysts surveyed by Yahoo! Finance are looking for sales of $601.1 million and earnings of 5 cents a share.

On a GAAP basis, Activision also raised its full-year 2013 revenue and earnings outlook to $4.31 billion and 77 cents a share, from $4.22 billion and 73 cents a share. Excluding items, the company affirmed its full-year outlook of $4.25 billion and 82 cents a share. Wall Street is looking for full-sales of $4.29 billion and earnings of 85 cents a share.

Activision will announce its full second-quarter results on Aug.1.

-- Written by James Rogers in New York.

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