July 6 (Bloomberg) -- Activision Blizzard Inc., the video-game company put on the block by majority shareholder Vivendi SA, gave Co-Chairman Brian Kelly a new contract that pays him a bonus of $15 million or more if the company gets bought.
Kelly, who has helped run Santa Monica, California-based Activision since 1991, will be entitled to the cash bonus if there’s a change in control or if he’s fired without cause up to six months before, the company said in a regulatory filing yesterday. Kelly stands to get a minimum of $15 million or 50 percent of a similar bonus paid to Chief Executive Officer Bobby Kotick, whichever is higher.
France’s Vivendi, which controls 61 percent of the company, is seeking a buyer for its $8.2 billion stake, a person with knowledge of the situation said last week. Activision is the largest video-game publisher and created the “Call of Duty” and “Prototype” series. The bonuses may encourage management to go along with a sale, said Claudio Aspesi, a London-based analyst at Sanford C. Bernstein.
“It incentivizes management not to get nervous and leave while things play out, and it incentivizes management to avoid boycotting” the process, Aspesi said in an interview. “This is a step in the right direction because it even more clearly tilts the balance of the assets toward making Vivendi a telco-only company.”
Vivendi, whose biggest unit is French mobile-phone business SFR, ousted Chief Executive Officer Jean-Bernard Levy last week triggered by a clash with the board over strategy. Levy had been criticized by shareholders asking for plans to tackle the low valuation of Paris-based Vivendi, which also owns Universal Music Group and phone businesses in Morocco and Brazil, as the company’s stock price hit a nine-year low in April.
Still, Vivendi shareholders may not see the benefits of an Activision sale right away, Aspesi said. Most of the cash from a divestiture would likely be used to reduce debt and maintain the company’s credit ratings, he said.
All three major ratings company have warned Vivendi that its debt rating could be threatened if it doesn’t reduce liabilities. Vivendi’s net debt increased to about 12.5 billion euros ($15.5 billion) at the end of March, nearing the level reached a decade ago.
Should no buyer emerge for Activision, Vivendi will sell shares on the market, one person with knowledge of the situation has said.
Vivendi rose 0.2 percent to 14.87 euros in Paris trading as of 1:31 p.m. Activision, the largest U.S. video-game publisher, fell 2.7 percent to $12.13 yesterday in New York. The shares have dropped 1.5 percent this year.
In March, Activision’s board approved a four-year contract for CEO Kotick, which also contains change-of-control provisions. Kotick, 49, would receive up to $30 million if the company gets bought. He would get $45 million if he were to be fired without cause before a buyout, or if ownership were to change hands after Dec. 31, 2012, according to a company filing.
Maryanne Lataif, a spokeswoman for Activision, said she didn’t know details of change-of-control provisions of previous executive employment contracts. Vivendi officials didn’t immediately return a call seeking comment.