Vivendi to acquire controlling stake in Activision

SAN FRANCISCO - Vivendi said yesterday that it planned to acquire a controlling stake in Activision in a deal that creates a rival to Electronic Arts as the world's largest independent video-game publisher.

The deal combines Activision and Vivendi Games, companies with different areas of strength in the booming video-game business. Activision's emphasis is on making games for consoles, like the Sony PlayStation 3 and the Microsoft Xbox 360. Its game franchises include the "Tony Hawk" skateboarding games, the "Call of Duty" war-game series and one of the industry's current best-sellers, "Guitar Hero," which allows players to strum along on a plastic guitar to tunes played on television.

Vivendi's strength is in online games, like "World of Warcraft," which its Blizzard Entertainment unit has built into a worldwide phenomenon with more than 9 million players worldwide.

The combination of the two companies, to be known as Activision Blizzard, comes at the end of a record year for video-game sales. Recent new game consoles from Microsoft, Sony and Nintendo have set off the release of new games and sequels to popular franchises, and expanded the audience to older men and women.

Behind the boom, the industry's competitive landscape is shifting. The dominance of Sony, with its PlayStation 3, has been upended by the Wii, the console made by the once also-ran Nintendo. So, too, there are indications of a shift - or at least a change of momentum - on the software side. The sales growth of the leading game-maker, Electronic Arts, lags behind Activision's. Sales at Activision rose to $1.5 billion in 2007, a 74 percent jump from 2003. In the same period, Electronic Arts' revenue rose 25 percent, to $3.1 billion.

The deal seeks to upend Electronic Arts' dominance by creating a company that can match it in size and breadth. But the new company also faces formidable challenges as it tries to develop the kind of enduring library of game titles that has given Electronic Arts its long dominance.

The companies said Vivendi would pay $27.50 a share and make a cash infusion of $1.7 billion to acquire a 52 percent stake in Activision, valuing the combined company at $18.9 billion. *