• New York Times, Monday, December 3, 2007 11:45 AM

Vivendi Games and Activision are combining to create the world's biggest third-party maker of video games. The creation of the new company, called Activision Blizzard, comes at a time of record game sales for both developers. Activision expects 2007 revenue of $1.7 billion. Vivendi's strength, meanwhile, is massively multiplayer online gaming, particularly World of Warcraft, with more than nine million worldwide subscribers who each pay $15 per month.

The deal is a complicated one: Activision will be assuming Vivendi Games, as the latter is converted into 295.3 million new shares of Activision common stock, valuing the Vivendi unit at $8.1 billion. The media conglomerate will also purchase 62.9 million newly issued shares of Activision for $1.7 billion. The combined company will trade on the NASDAQ, repurchasing $4 billion worth of its shares at $27.50 per share. By the conclusion of the transaction, Vivendi should own 68 percent stake of Activision Blizzard, which will be valued at $18.9 billion.

Vivendi Games and Activision have combined estimated 2007 revenue of $3.8 billion. By comparison, Electronic Arts, currently the world's largest third-party developer, expects to make $3.7 billion this year, which would immediately make Activision Blizzard slightly bigger.

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