Activision Blizzard Announces Transformative Purchase of Shares from Vivendi and New Capital Structure

  Activision Blizzard Announces Transformative Purchase of Shares from Vivendi
  and New Capital Structure

 Company to Buy Back Approximately 429 Million Shares from Vivendi for $5.83
                                   Billion

    Investor Group Led By CEO Bobby Kotick and Co-Chairman Brian Kelly to
Separately Purchase Approximately 172 Million Activision Blizzard Shares from
                          Vivendi for $2.34 Billion

    New Capital Structure Expected to Drive Meaningful Earnings-Per-Share
                                  Accretion

        Activision Blizzard Reports Preliminary Second Quarter Results

Business Wire

SANTA MONICA, Calif. -- July 25, 2013

Activision Blizzard, Inc. (Nasdaq: ATVI) (the “Company”), a global leader in
interactive entertainment, announced today that it reached an agreement under
which it will acquire from Vivendi (Euronext Paris: VIV) approximately 429
million Company shares and certain tax attributes, in exchange for
approximately $5.83 billion in cash, or $13.60 per share acquired before
taking into account the future benefit from these tax attributes. In a
simultaneous transaction, ASAC II LP, an investment vehicle led by Activision
Blizzard CEO Bobby Kotick and Co-Chairman Brian Kelly, to which they have
personally committed $100 million combined, separately will purchase
approximately 172 million Company shares from Vivendi for approximately $2.34
billion in cash, or $13.60 per share.

Following the completion of the transaction, Activision Blizzard will be an
independent company with the majority of its shares owned by the public. The
Company will be led by Bobby Kotick as Chief Executive Officer and Brian Kelly
as Chairman. Vivendi will no longer be the majority shareholder, but will
retain a stake of 83 million shares or approximately 12%. ASAC II LP—the
investor group which, in addition to Kotick and Kelly, includes Davis
Advisors, Leonard Green & Partners, L.P., Tencent, as well as one of the
largest global institutional investors—will own a stake of approximately
24.9%.

Activision Blizzard expects that its new outstanding share count and capital
structure (which will include approximately $1.4 billion of net debt) will
result in expected pro forma 2013 earnings-per-share (EPS) accretion of
between 18% and 29% on a GAAP basis and between 23% and 33% on a non-GAAP
basis.

Bobby Kotick, CEO of Activision Blizzard, said, “These transactions together
represent a tremendous opportunity for Activision Blizzard and all its
shareholders, including Vivendi. 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. The transactions
announced today will allow us to take advantage of attractive financing
markets while still retaining more than $3 billion cash on hand to preserve
financial stability.”

Mr. Kotick continued, “Our successful combination with Blizzard Entertainment
five years ago brought together some of the best creative and business talent
in the industry and some of the most beloved entertainment franchises in the
world, including Call of Duty®  and World of Warcraft®. Since that time, we
have generated over $5.4 billion in operating cash flow and returned more than
$4 billion of that to shareholders via buybacks and dividends. We are grateful
for Vivendi’s partnership through this period, and we look forward to their
continued support.”

Activision Blizzard will fund the acquisition with the combination of
approximately $1.2 billion of domestic cash on hand and approximately $4.6
billion of debt proceeds, net of fees and upfront interest, accessed through
the capital markets and bank financing. The Company has received committed
financing for the transaction from Bank of America Merrill Lynch and J.P.
Morgan. The transaction is expected to close by the end of September 2013,
subject to customary closing conditions.

A special committee of independent directors was formed to represent the
Company in negotiating and evaluating the transactions.

Please see the Company’s Current Report on Form 8-K being filed with the
Securities and Exchange Commission and the exhibits thereto for further
information about the terms of the transactions.

Activision Blizzard’s financial advisor on the transaction is J.P. Morgan
Securities LLC and its legal counsel is Skadden, Arps, Slate, Meagher & Flom
LLP. The Special Committee’s financial advisor is Centerview Partners and its
legal counsel is Wachtell, Lipton, Rosen & Katz. ASAC II LP’s financial
advisor is Allen & Company LLC and its legal counsel is Sullivan & Cromwell
LLP.

Preliminary Second Quarter Results and Full-Year Outlook

For the second quarter, Activision Blizzard expects to report GAAP net revenue
of approximately $1.05 billion and Non-GAAP net revenue of approximately $608
million, with GAAP earnings per diluted share of $0.28 and Non-GAAP earnings
per diluted share of approximately $0.08. In addition, the Company will
announce full second quarter results on August 1, 2013 and hold its regularly
scheduled conference call for analysts and investors at that time.

For the quarter, Activision Blizzard was the #1 independent publisher in North
America and Europe combined, including accessory packs and figures, with the
#1 and #2 best-selling titles year-to-date– Skylanders Giants™ and Call of
Duty: Black Ops II.¹ Additionally, Blizzard Entertainment’s World of Warcraft®
remained the world’s #1 subscription-based MMORPG, ending the quarter with
approximately 7.7 million subscribers.²

The Company raised its full-year 2013 GAAP net revenue outlook to $4.31
billion and its earnings per diluted share outlook to $0.77, up from its prior
net revenue outlook of $4.22 billion and earnings per diluted share outlook of
$0.73. Additionally, the Company affirmed its full-year 2013 Non-GAAP net
revenue outlook of $4.25 billion and earnings per diluted share outlook of
$0.82. These full-year outlook numbers do not yet account for any benefit of
earnings per share accretion from the announced transaction.

Conference Call and Webcast Information

Activision Blizzard will host a conference call and live webcast on Friday,
July 26, 2013 at 8:30 a.m. ET, 2:30 p.m. Paris time, 1:30 p.m. London time to
discuss this announcement. The company welcomes listeners to the call live by
dialing (866) 953-6860 in the U.S. or (617) 399-3484 outside the U.S. using
the passcode 14828517. The live webcast of the call can be accessed at
www.activisionblizzard.com.

For those unable to listen to the live conference call, an audio replay of the
call will be available through August 9, 2013 and can be accessed by calling
(888) 286-8010 in the U.S. or (617) 801-6888 outside the U.S. and using the
passcode: 30609761. In addition, a webcast replay also will be archived on the
Investor Relations section of Activision Blizzard’s website.

About Activision Blizzard

Activision Blizzard, Inc. is the world’s largest and most profitable
independent interactive entertainment publishing company. It develops and
publishes some of the most successful and beloved entertainment franchises in
any medium, including Call of Duty, World of Warcraft, Skylanders, and
Diablo®. Headquartered in Santa Monica California, it maintains operations
throughout the United States, Europe, and Asia. Activision Blizzard develops
and publishes games on all leading interactive platforms and its games are
available in most countries around the world. More information about
Activision Blizzard and its products can be found on the company's website,
www.activisionblizzard.com.

¹According to The NPD Group, GfK Chart-Track and Activision Blizzard internal
estimates, including toys and accessories

²According to Activision Blizzard internal estimates

Subscriber Definition: World of Warcraft subscribers include individuals who
have paid a subscription fee or have an active prepaid card to play World of
Warcraft, as well as those who have purchased the game and are within their
free month of access. Internet Game Room players who have accessed the game
over the last thirty days are also counted as subscribers. The above
definition excludes all players under free promotional subscriptions, expired
or cancelled subscriptions, and expired prepaid cards. Subscribers in
licensees' territories are defined along the same rules.

Non-GAAP Financial Measures

As a supplement to our financial measures presented in accordance with
Generally Accepted Accounting Principles (“GAAP”), Activision Blizzard
presents certain non-GAAP measures of financial performance. These non-GAAP
financial measures are not intended to be considered in isolation from, as a
substitute for, or as more important than, the financial information prepared
and presented in accordance with GAAP. In addition, these non-GAAP measures
have limitations in that they do not reflect all of the items associated with
the company’s results of operations as determined in accordance with GAAP.

Activision Blizzard provides net revenues, net income (loss), earnings (loss)
per share and operating margin data and guidance and pro forma both including
(in accordance with GAAP) and excluding (non-GAAP) certain items. The non-GAAP
financial measures exclude the following items, as applicable in any given
reporting period:

  *the change in deferred net revenue and related cost of sales with respect
    to certain of the company’s online-enabled games;
  *expenses related to stock-based compensation;
  *the amortization of intangibles from purchase price accounting;
  *fees and other expenses related to the transaction; and
  *the income tax adjustments associated with any of the above items.

In the future, Activision Blizzard may also consider whether other significant
non-recurring items should also be excluded in calculating the non-GAAP
financial measures used by the company. Management believes that the
presentation of these non-GAAP financial measures provides investors with
additional useful information to measure Activision Blizzard’s financial and
operating performance. In particular, the measures facilitate comparison of
operating performance between periods and help investors to better understand
the operating results of Activision Blizzard by excluding certain items that
may not be indicative of the company’s core business, operating results or
future outlook. Internally, management uses these non-GAAP financial measures
in assessing the company’s operating results, as well as in planning and
forecasting.

Activision Blizzard’s non-GAAP financial measures are not based on a
comprehensive set of accounting rules or principles, and the terms non-GAAP
net revenues, non-GAAP net income, non-GAAP earnings per share, and non-GAAP
operating margin do not have a standardized meaning. Therefore, other
companies may use the same or similarly named measures, but exclude different
items, which may not provide investors a comparable view of Activision
Blizzard’s performance in relation to other companies.

Management compensates for the limitations resulting from the exclusion of
these items by considering the impact of the items separately and by
considering Activision Blizzard’s GAAP, as well as non-GAAP, results and
outlook, and by presenting the most comparable GAAP measures directly ahead of
non-GAAP measures, and by providing a reconciliation that indicates and
describes the adjustments made.

In addition to the reasons stated above, which are generally applicable to
each of the items Activision Blizzard excludes from its non-GAAP financial
measures, there are additional specific reasons why the company believes it is
appropriate to exclude the change in deferred net revenue and related cost of
sales with respect to certain of the company’s online-enabled games.

Since Activision Blizzard has determined that some of our games’ online
functionality represents an essential component of gameplay and, as a result,
a more-than-inconsequential separate deliverable, we recognize revenue
attributed to these game titles over their estimated service periods, which
may range from five months to a maximum of less than a year. The related cost
of sales is deferred and recognized as the related revenues are recognized.
Internally, management excludes the impact of this change in deferred net
revenue and related cost of sales in its non-GAAP financial measures when
evaluating the company’s operating performance, when planning, forecasting and
analyzing future periods, and when assessing the performance of its management
team.

Management believes this is appropriate because doing so enables an analysis
of performance based on the timing of actual transactions with our customers,
which is consistent with the way the company is measured by investment
analysts and industry data sources. In addition, excluding the change in
deferred net revenue and the related cost of sales provides a much more timely
indication of trends in our operating results.

Cautionary Note Regarding Forward-looking Statements:

Information in this press release that involves Activision Blizzard’s
expectations, plans, intentions or strategies regarding the future, including,
but not limited to, statements about (1) projections of revenues, expenses,
income or loss, earnings or loss per share, cash flow or other financial
items; (2) statements of our plans and objectives; (3) statements of future
financial or operating performance; and (4) statements about the completion,
timing, financing and impact of the transactions described herein are
forward-looking statements that are not facts and involve a number of risks
and uncertainties. Activision Blizzard generally uses words such as “outlook,”
“forecast,” “will,” “could,” “should,” “would,” “to be,” “plans,” “believes,”
“may,” “expects,” “intends,” “anticipates,” “estimate,” “future,”
“positioned,” “potential,” “project,” “remain,” “scheduled,” “set to,”
“subject to,” “upcoming” and similar expressions to identify forward-looking
statements.

Forward looking statements are subject to business and economic risk, reflect
management’s current expectations, estimates and projections about our
business, and are inherently uncertain and difficult to predict. Factors that
could cause Activision Blizzard’s actual future results to differ materially
from those expressed in the forward-looking statements set forth in this
release include, but are not limited to, sales levels of Activision Blizzard’s
titles, increasing concentration of titles, shifts in consumer spending
trends, the impact of the current macroeconomic environment, Activision
Blizzard’s ability to predict consumer preferences, including interest in
specific genres such as first-person action and massively multiplayer online
games and preferences among competing hardware platforms, the seasonal and
cyclical nature of the interactive game market, changing business models
including digital delivery of content, competition, including from used games
and other forms of entertainment, possible declines in software pricing,
product returns and price protection, product delays, adoption rate and
availability of new hardware (including peripherals) and related software,
particularly during the expected console transition, rapid changes in
technology and industry standards, the current regulatory environment,
litigation risks and associated costs, protection of proprietary rights,
maintenance of relationships with key personnel, customers, licensees,
licensors, vendors, and third-party developers, including the ability to
attract, retain and develop key personnel and developers that can create high
quality "hit" titles, counterparty risks relating to customers, licensees,
licensors and manufacturers, domestic and international economic, financial
and political conditions and policies, foreign exchange rates and tax rates,
and the identification of suitable future acquisition opportunities and
potential challenges associated with geographic expansion, capital market
risks, the possibility that expected benefits related to the transactions may
not materialize as expected, the transactions not being timely completed, if
completed at all, and the other factors identified in the risk factors section
of Activision Blizzard’s most recent annual report on Form 10-K, as amended.
The forward-looking statements in this release are based upon information
available to Activision Blizzard as of the date of this release, and
Activision Blizzard assumes no obligation to update any such forward-looking
statements.

Although these forward-looking statements are believed to be true when made,
they may ultimately prove to be incorrect. These statements are not guarantees
of the future performance of Activision Blizzard and are subject to risks,
uncertainties and other factors, some of which are beyond its control and may
cause actual results to differ materially from current expectations.

Tables to Follow:

                                                        
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Preliminary Results For the Quarter Ended June 30,
2013
GAAP to Non-GAAP Reconciliation
(Amounts in millions, except per share data)
                                                        
                                                        
                                                        Quarter Ended
                                                        June 30, 2013
                                                        (Preliminary results)
                                                        
Net Revenues (GAAP)                                $    1,050
                                                        
Excluding the impact of:
Change in deferred net revenues                    (a)  (442)
                                                        
Non-GAAP Net Revenues                              $    608
                                                        
Earnings Per Diluted Share (GAAP)                  $    0.28
                                                        
Excluding the impact of:
Net effect from deferral in net revenues and       (b)  (0.22)
related cost of sales
Stock-based compensation                           (c)  0.01
Amortization of intangible assets                  (d)  -
                                                        
Non-GAAP Earnings Per Diluted Shares               $    0.08
                                                        
                                                        
(a) Reflects the net change in deferred net
revenues.
(b) Reflects the net change in deferred net revenues and related cost of
sales.
(c) Reflects expenses related to stock-based
compensation.
(d) Reflects amortization of intangible assets from purchase price accounting.
                                                        
The per share adjustments are presented as calculated, and the GAAP and
non-GAAP earnings (loss)
per share information is also presented as calculated. The sum of these
measures, as presented,
may differ due to the impact of rounding.
                                                        
Preliminary results are based on information known to the Company as of July
25, 2013. Actual
results will be announced on August 1, 2013 and
may vary.
                                                        

                                                              
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES OUTLOOK
For the Year
Ending December
31, 2013
GAAP to
Non-GAAP
Reconciliation
(Amounts in
millions,
except per
share data)
                                                              
                     Outlook for         Outlook for          Outlook for
                     Year Ending         Year Ending          Year Ending
                     December 31,        December 31, 2013    December 31,
                     2013                                     2013
                     Pre-transaction     Post-transaction     Post-transaction
                                         Pro-forma basis*     Pro-forma basis*
                                         Low end of range     High end of
                                                              range
                                                              
Net Revenues    $    4,310            $  4,310             $  4,310
(GAAP)
                                                              
Excluding the
impact of:
Change in
deferred net    (a)  (60)                (60)                 (60)
revenues
                                                            
Non-GAAP Net    $    4,250            $  4,250             $  4,250
Revenues
                                                              
Earnings Per
Diluted Share   $    0.77             $  0.91              $  0.99
(GAAP)
                                                              
Excluding the
impact of:
Net effect from
deferral in net
revenues and    (b)  (0.03)              (0.05)               (0.05)
related cost of
sales
Stock-based     (c)  0.07                0.11                 0.11
compensation
Amortization of
intangible      (d)  0.01                0.02                 0.02
assets
Fees and other
expenses        (e)  -                   0.02                 0.02
related to the
transaction
                                                            
Non-GAAP
Earnings Per    $    0.82             $  1.01              $  1.09
Diluted Shares
                                                              
                                                              
(a) Reflects the net change in
deferred net revenues.
(b) Reflects the net change in deferred net revenues and related cost of
sales.
(c) Reflects expenses related to stock-based compensation.
(d) Reflects amortization of intangible assets from purchase price accounting.
(e) Reflects fees and other expenses related to the transaction.
                                                              
The per share adjustments are presented as calculated, and the GAAP and
non-GAAP earnings (loss) per share information is also presented as
calculated. The sum of these measures, as presented, may differ due to the
impact of rounding.
                                                              
* Pro-forma assumes the transactions and their related financial impacts
(including interest expenses from debt, and associated fees and expenses, and
lower share count as of result of the repurchases) commences January 1, 2013.


Contact:

Activision Blizzard Investor Relations:
Kristin Southey, 310-255-2635
Sr. Vice President, IR and Treasurer
ksouthey@activision.com
or
Activision Blizzard Media:
Maryanne Lataif, 310-255-2704
SVP, Corporate Communications
mlataif@activision.com
or
Sard Verbinnen & Co
Stephanie Pillersdorf/Cassandra Bujarski
212-687-8080/310-201-2040