Vivendi, Activision Form Games Juggernaut

Jean-Bernard Lévy and Robert Kotick have had a busy holiday season. On Dec. 2, Lévy, the chief executive of Vivendi (VIV.PA), and Kotick, the CEO of Activision (ATVI), announced an $18.9 billion deal that will create the world's largest independent video game publisher and a fierce competitor to the longtime industry leader, $3 billion Electronic Arts (ERTS). The deal combines Activision, a $1.5 billion maker of the top-selling Guitar Hero, Call of Duty, and Tony Hawk franchises, with Vivendi Games, whose Blizzard Entertainment unit has a huge hit with World of Warcraft. The online fantasy game has 9.3 million members paying monthly subscription fees to play.

Under the terms of the proposed merger, the $29 billion Paris-based entertainment and telecom conglomerate will exchange its Vivendi Games and $1.7 billion in cash for a 52% stake in the new company, which will be called Activision Blizzard. Within four days of that transaction, the new company will make a tender offer for $4 billion worth of Activision shares at $27.50 per share, a 24% premium on the closing price Nov. 30. BusinessWeek.com's Christopher Palmeri spoke with Kotick, who'll continue to be Activision Blizzard's CEO, and Lévy on the day they announced the merger.