Activision to separate from Vivendi in a $8.2 billion buyout

The maker of popular video games such as World of Warcraft and Call of Duty is taking steps to sign $8.2 billion deal and assure independence from the French telecom and entertainment company.

The decision to separate from Vivendi represents a “tremendous opportunity” for Activision, CEO Bobby Kotick said, further ensuring its foothold as the worlds largest video game publisher. Vivendi is selling the shares for $13.60 each, representing a 10% discount to Activisions closing price on Thursday. Activision Blizzard plans to buy back 429 million shares for about $5.8 billion from French media company. After the deal, Vivendi will acquire a stake of 83 million shares, or 12% of the video games maker.

The move follows weeks of speculation that the French media and telecom conglomerate was looking for ways to pull some of the $4.3 billion in cash sitting on the balance sheet of the worlds largest video games publisher as part of a wider restructuring aimed at diminishing debt and refocusing its business.

The transactions would allow Vivendi to gain substantial tax benefits. They will also reduce debt at a time when the company is re-organizing its business, put under pressure from investors.

The acquisition will be funded with $1.2 billion in cash and $4.6 billion in debt financing from banks including JP Morgan Chase and Bank of America.

Jean-François Dubos, chairman of Vivendi’s management board, said the deal represented “an important step forward” in the strategic review it began last year. Philippe Capron, chairman of Activision and chief financial officer of Vivendi, emphasised the deal’s “massively accretive impact for minority shareholders”. However, the company raised its full-year GAAP revenue outlook from $4.22 billion to $4.31 billion. It said earnings per diluted share would be 77 cents, rather than its previous guidance of 73 cents. Activision reported revenues of $4.86 billion for 2012, with net income of $1.15 billion.

Activision shares retreated 21 cents at $15.18 on Thursday. The stock is up 43% this year, but it has under-performed some competitors. Vivendi’s shares are down almost 6% since the start of the year.