The Deal: Vivendi Offloads Most of Activision

NEW YORK ( The Deal) -- France's Vivendi SA said on Friday, July 26, that it has agreed to sell the bulk of its holding in Activision Blizzard ( ATVI) back to the video games maker and its management for $8.2 billion, its second multi-billion dollar deal in less than a week.

Vivendi will sell a 49.1% stake, or 601 million shares, in Santa Monica, Calif.-based Activision for $13.60 per share. The bulk of that holding will be bought by Activision itself, which will spend $5.8 billion to acquire 429 million shares.

ASAC II LP, an investment consortium led by Activision CEO Bobby Kotick and Co-Chairman Brian Kelly, will acquire the remaining 172 million shares, leaving them with a 24.9% stake in Activision. ASAC II's financial backers are Davis Advisors, Leonard Green & Partners, Chinese video games publisher Tencent Holdings and an unnamed "global institutional investor."

The announcement of the sale comes as a surprise as many analysts had given up hope of an imminent deal for Activision after a sales process, launched last year, failed to unearth a buyer willing to acquire the $17 billion games giant.

The deal will also serve to silence critics of Vivendi's slow-burn restructuring, which had promised radical change to arrest a share price decline and rein in debt. That restructuring had failed to deliver tangible results until earlier this week, when Vivendi said that it had entered exclusive talks to sell its 53% stake in Moroccan mobile operator Maroc Telecom to Emirate Telecommunications, or Etisalat, for 4.2 billion Euros ($5.5 billion) in cash. Vivendi said that part of the proceeds from the sale of Activision will be injected into its balance sheet to secure its BBB/Baa2 rating.

"This transaction represents an important step forward in the strategic review conducted by the Vivendi Supervisory Board over the last year," Vivendi Chairman Jean-Francois Dubos said in a statement. "It provides the Group with greater financial flexibility and creates value for our shareholders."

Vivendi shares traded Friday morning at 16.33 Euros, up 0.35 Euros, or 2.2% on their Thursday close. The stock has gained just over 5% in the past week, buoyed by the announcement of the pending sale of its Maroc Telecom stake, but remains down just over 3.5% since the start of the year.

The deal for Activision values the world's largest games publisher at a 10% discount to its Thursday closing price of $15.18. It will leave the maker of Guitar Hero and Call of Duty with no majority owner for the first time in five years.

Activision will use $1.2 billion of cash on its books and $4.6 billion of debt to fund the share buyback. Bank of America Merrill Lynch ( BAC) and J.P. Morgan Chase ( JPM) will supply debt for the deal.

ASAC II has also secured equity and debt financing for its transaction. Those funds include about $50 million of equity from Activision's Kotick and Kelly. Kotick has led Activision for almost 20 years. Following the transactions Vivendi will retain a 12% stake in Activision and has agreed to a staggered 15-month lockup on its stake.

Written by Paul Whitfield.

More from Mergers and Acquisitions

10 Questions for PayPal Ahead of Its Big Investor Day

10 Questions for PayPal Ahead of Its Big Investor Day

Congress May Have Just Set in Motion a Huge Banking Industry Merger Wave

Congress May Have Just Set in Motion a Huge Banking Industry Merger Wave

Attention 60 Minutes: Google Isn't the Only Big-Tech Monopoly

Attention 60 Minutes: Google Isn't the Only Big-Tech Monopoly

Apple Buys Tesla? Amazon Buys Sears? 3 Dream Mergers That Just Make Sense

Apple Buys Tesla? Amazon Buys Sears? 3 Dream Mergers That Just Make Sense

Square Shares Shake Off Concerns About PayPal's Deal for iZettle

Square Shares Shake Off Concerns About PayPal's Deal for iZettle