Activision Blizzard: Strongly in the Game Following European Commission Approval

It’s all systems go for the combination of Vivendi Games and Activision (ATVI). Wednesday, the companies got the go ahead from European regulators. Officially, the European Commission will not move to block the deal for antitrust reasons.

The antitrust evaluation was conducted as part of a routine investigation following the proposed merger’s December announcement. There was little likelihood of a regulatory blockade but the size of the two companies, and the behemoth the merger would create, was sufficient for the European regulators to take caution to insure it would not negatively influence competition in the industry.

In the EC’s report, they concluded that “horizontal overlaps between the activities of Vivendi and Activision in relation to game software publishing are limited and that, for all categories of game software, the combined firm would continue to face several strong, effective competitors, such as Electronic Arts (ERTS), and the game console makers such as Sony (SNE), Nintendo (NTDOY.PK) and Microsoft (MSFT).”

In addition to the deal’s influence on game publishing, the Commission also considered the merger's potential impact on music licensing. Because of Vivendi’s ownership of Big 4 record label Universal Music, and because of the increasing relevance of music to the gaming industry both in general and in games like Activision’s Guitar Hero franchise, there were some concerns. As with publishing, it proved a non-issue. In a statement, the Commission wrote the “relationship would not give rise to competition concerns, as competing game publishers would continue to have access to a sufficiently large portfolio of music rights from alternate suppliers.”

To complete the deal, Vivendi will contribute a total of $9.8 billion. $1.7b of that will be in cash, and the rest being the assets of Vivendi’s gaming business (which includes Blizzard Entertainment, Sierra and Vivendi Games mobile). These assets combined with Activision’s will be spun into a new company to be called Activision Blizzard. The combined value will be about $18.9 billion. Vivendi will retain a 52% majority stake.

Taking in to account Activision’s phenomenal success with console gaming (Guitar Hero has racked up more than $1 billion in retail sales), and the online role playing achievements of Blizzard (their World of Warcraft franchise which passed 10 million subscribers in January), the company will be in a position to rival any publisher in the industry in breadth of development or economic scale.

(If the companies had been combined last year, their joint annual revenue would have been equal to approximately $2.5 billion.)

Activision CEO Robert Kotick will be President and CEO of the new venture. Bruce Hack, CEO at Vivendi Games, will be Vice Chairman and Chief Corporate Officer.

[More detail on how the two companies’ assets overlap and complement each other can be found in this prior article on Metue reviewing the deal in detail.]