Market Overview

Vivendi Finding Scant Interest While Shopping Activision Stake

Vivendi SA is currently trying to find a buyer for its $8.1 billion stake in Activision Blizzard (NASDAQ: ATVI). Interest is lukewarm, according to Bloomberg. The company's Chairman, Jean-Rene Fourtou said in an interview at the Allen & Co. media conference being held in Sun Valley, Idaho that Vivendi is considering selling its 61 percent stake in the video-game publisher.

According to Bloomberg sources, both Microsoft (NASDAQ: MSFT) and Disney (NYSE: DIS) turned down overtures to purchase Activision. When asked about a potential sale, Fourtou said that "It's a possibility" and replied to a question about whether he was looking for a suitor at the conference by saying “We're always looking at opportunities for all of our businesses.”

According to a Wedbush analyst interviewed by Bloomberg, the Allen & Co. conference, which is attended by some of the world's most prominent titans of industry, is the best place to try to make a deal for Activision. While Activision is the world's largest video-game publisher, and has had a number of huge hits in recent years, the company's long-term model is under pressure as games move online. Over the last year, Activision shares are up a little less than 2%, compared to a gain of more than 9% for the Nasdaq 100.

Despite its prominent position in its industry, a deal for Activision may be tough to swing. For one, Vivendi's stake is large. At $8.1 billion, how many media or technology companies could afford it? Not many. An even bigger problem is that the video-game publishing niche would be considered a non-core business for most of the companies who could do a deal.

Bloomberg reported that Disney and Microsoft don't seem very interested, and that Vivendi approached Asian companies Tencent Holdings (PINK: TCEHY) and Nexon. These two potential buyers, though, don't have the cash to do the deal -- sources disclosed that Vivendi is looking for a cash transaction. These sources also told Bloomberg that the company will discuss its strategy in more detail when it reports earnings on August 30.

If a deal can't be done, another potential option would be a public stock sale, which would very likely weigh on Activision shares. Selling shares to the public is an alternative that Activision's management would likely find unfavorable. Instead, Sterne Agee analyst Arvind Bhatia told Bloomberg that Activision CEO Robert Kotick may be interested in lining up partners for a management-led plan to purchase Vivendi's stake. “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.”

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