Vivendi’s Search for Activision Suitors Off to Slow Start

Vivendi Said to Seek Buyer for $8.1 Billion Stake in Activision
Attendees visit the Activision Blizzard Inc. display at the E3 Expo in Los Angeles. Photographer: Patrick Fallon/Bloomberg

Vivendi SA Chairman Jean-Rene Fourtou, looking for a buyer for the company’s $8.27 billion stake in Activision Blizzard Inc., is finding little enthusiasm among potential suitors.

Fourtou, in an interview yesterday at the Allen & Co. media conference in Sun Valley, Idaho, said Vivendi may sell its 61 percent stake in Activision, the largest U.S. video-game publisher. Microsoft Corp., maker of the Xbox console, Take-Two Interactive Software Inc. and Walt Disney Co., the world’s largest entertainment company, aren’t pursuing bids, people with knowledge of their plans said.

“It’s a possibility,” Fourtou said of a sale after walking with Activision Chief Executive Officer Bobby Kotick. His comments marked the first public confirmation that the holding is on the block. Asked if he was trying to find a buyer at the event, Fourtou said: “We’re always looking at opportunities for all of our businesses.”

The Sun Valley retreat, known for big media deals, may offer the best hope for Fourtou and Kotick to attract a suitor, Michael Pachter, an analyst with Wedbush Securities in Los Angeles, said in an interview. Activision’s focus on packaged games at a time when the business is moving online will be a deterrent, he said.

“This is the beauty contest,” Pachter said. “If you can’t get a date there, you’re probably going to die a spinster.”

Strategic Fit

Just as Vivendi considers Activision a non-core asset, other media companies don’t see a strategic fit for the Santa Monica, California-based company, Pachter said.

For weeks, Paris-based Vivendi has canvassed possible buyers, people familiar with the matter have said.

Microsoft, while approached, isn’t actively considering a bid, according to one person. That could change, the person said. The software company, based in Redmond, Washington, would have to consider that buying Activision may jeopardize sales of the company’s “Call of Duty” games for rival consoles made by Sony Corp. and Nintendo Co.

Disney, based in Burbank, California, is unlikely to bid for Activision, according to a person with knowledge of the company’s plans.

Take-Two, the New York-based publisher of “Grand Theft Auto” and “Red Dead Redemption, isn’t interested, a person with knowledge of the company’s plans said.

Tencent, Nexon

Vivendi gained 3.5 percent to 15.77 euros today in Paris. The stock has risen 20 percent since Bloomberg News reported on June 7 that the future of Activision would be discussed at a senior executive meeting.

Activision, also the publisher of the ‘‘World of Warcraft” online game, gained 1.7 percent to $12.10 at the close in New York, giving the company a market value of $13.5 billion. The shares are down 1.8 percent this year.

Vivendi is seeking a cash sale, one person said. That could complicate any deal with China’s Tencent Holdings Ltd. or Japan’s Nexon Co., both of which were approached, according to the people. Neither company has sufficient cash to fund such a purchase.

Wayne Hickey, a spokesman for Microsoft, declined to comment, as did John Christiansen, a spokesman for Nexon. Catherine Chan, a spokeswoman for Tencent, and Alan Lewis, a spokesman for Take-Two, said their companies do not comment on market speculation.

Disney CEO Robert Iger brushed off reporters’ questions on July 10 about Activision, saying “I’m talking to everyone” at Sun Valley.

‘Great Weather’

Kotick, who has led Activision for at least 20 years, has seen his largest shareholder transformed from a stable, hands-off investor to a candidate for breakup. Strolling yesterday with Fourtou, he walked away before the chairman’s comments to a reporter.

Asked a day earlier about a sale, Kotick replied, “It’s great weather.”

Vivendi will consider selling Activision shares on the market if it can’t find a buyer, a person with knowledge of the matter said last month. The French company is planning to make some announcements about its strategy when it reports first-half earnings on Aug. 30, a person familiar with the matter said.

With few expressing interest in buying control of Activision, a large public sale of stock may depress the price, said Arvind Bhatia, an analyst with Sterne Agee & Leach Inc. in Dallas. Kotick may need to line up partners for a management-led plan to buy Vivendi’s stake, he said.

Debt Ratings

“Any transaction that happens will involve Activision as one of the partners,” Bhatia said in an interview. “Whether it’s today or in three months, I don’t think it really matters that much.”

Vivendi’s net debt totaled about 12.5 billion euros at the end of March. The company has been warned by Moody’s Investors Service and Fitch Ratings that its debt rating may be cut unless it reduces liabilities. The stock fell to a nine-year low in April, before the departure last month of CEO Jean-Bernard Levy in a clash over the direction of the company.

Activision had $3.48 billion in cash and no debt as of the first quarter, according to company filings. The stock trades at 14.6 times trailing earnings, according to data compiled by Bloomberg, below its 25.4 in fiscal 2010 and a five-year high of 67.6 in 2007.

The multiple reflects investor uncertainty over growth prospects during a transition phase for the video-game industry with the introduction of the first new consoles in seven years, Edward Woo, an analyst with Ascendiant Capital Markets LLC in Irvine, California, said in a recent interview.

Industry growth is now taking place on social-media websites such as and away from traditional consoles.

U.S. sales of packaged games like those played on Xbox or PlayStation fell 6 percent to $8.83 billion last year, according to researcher NPD Group Inc.

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