Should no buyer emerge for the 61 percent holding in the Santa Monica, California-based video-game publisher, Paris-based Vivendi plans to sell a partial holding on the open market, said the person, who declined to be named because the plans are private.
Vivendi Chairman Jean-Rene Fourtou is under pressure from investors to restructure his company and boost the stock price from a near nine-year low. The board had discussed a sale of part or all of its stake in publicly held Activision, maker of the “World of Warcraft” and “Call of Duty” titles, people with knowledge off the talks said earlier this month.
A Vivendi spokesman didn’t immediately respond to an e- mailed request for comment outside of business hours in France. Cassandra Bujarski, an outside spokeswoman for Activision, had no immediate comment.
Activision, the largest U.S. video-game publisher, rose 4.4 percent to $11.99 at the close in New York. The shares have declined 2.7 percent this year. Vivendi gained 3.1 percent to 14.63 euros in Paris, and is down 11 percent this year. The stock hit a nine-year low of 12.01 euros on April 19.
Vivendi Downgrades
Moody’s Investors Service and Fitch Ratings warned Vivendi this week that its debt ratings could be threatened if it doesn’t reduce liabilities. Fourtou this week ousted Chief Executive Officer Jean-Bernard Levy, who had resisted major changes in Vivendi’s structure.
A shifting market for video games may limit Activision’s attraction to buyers.
Activision trades at 14.4 times trailing earnings, according to data compiled by Bloomberg, below the 25.4 in fiscal 2010 and a five-year of high of 67.6 in 2007. Electronic Arts Inc. (EA), the second-largest game company, trades at 30 times trailing profit.
The multiples reflect investor concern over growth prospects during a transition phase for the video-game industry with the introduction of the first new consoles in seven years, said Edward Woo, an analyst with Ascendiant Capital Markets LLC in Irvine, California.
Online Growth
Industry growth is now taking place on social-media websites such as Facebook.com and away from traditional family room consoles from Microsoft Corp. (MSFT), Sony Corp. (6758) and Nintendo Co. 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.
“The problem is there are no readily apparent buyers for Activision,” Pachter said. “The only option left to Vivendi is to lever up Activision’s balance sheet and pay out all of its cash as a dividend, then spin the company off.”
Both Pachter and Woo recommend buying Activision stock.
Activision had $3.48 billion in cash and short-term investments as of March 31 and no debt, according to a quarterly filing. Last year, the company returned $886 million to shareholders in stock repurchases and dividends, the annual report shows.
From Bloomberg
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