In possibly the most surprising news in ages, gaming companies Activision and Vivendi have decided to merge and call themselves Acitivision Blizzard. The reason for the new name is that World of Warcraft developer Blizzard Entertainment is owned by Vivendi and is seen as a better name to keep.

The interesting Transformers related points here are, now with Activision, the Transformers game rights holder, being on the same team as the WoW guys, we could see the possibility of a Transformers MMORPG or regular strategy or something else apart from a regular action shooter.

Here is the full and really long press release:

SANTA MONICA, Calif. & PARIS, Dec 02, 2007 (BUSINESS WIRE) —
Activision, Inc. (NASDAQ: ATVI) and Vivendi (Euronext Paris: VIV)
today announced that they have signed a definitive agreement to
combine Vivendi Games, Vivendi’s interactive entertainment business —
which includes Blizzard Entertainment’s(R) World of Warcraft(R), the
world’s #1 multi-player online role-playing game franchise — with
Activision, creating the world’s largest pure-play online and console
game publisher. The new company, Activision Blizzard, is expected to
have approximately $3.8 billion in pro forma combined calendar 2007
revenues and the highest operating margins of any major third-party
video game publisher. On closing of the transaction, Activision will
be renamed Activision Blizzard and will continue to operate as a
public company traded on NASDAQ under the ticker ATVI.

Activision, one of the world’s leading independent publishers of
interactive entertainment, is best known for its top-selling
franchises, including Guitar Hero(R), Call of Duty(R) and the Tony
Hawk series, as well as Spider-Man(TM), X-Men(TM), Shrek(R), James
Bond(TM) and TRANSFORMERS(TM). Blizzard Entertainment, a division of
Vivendi Games, has projected calendar 2007 revenues of $1.1 billion,
operating margins of over 40% and approximately $520 million of
operating profit. Blizzard owns the #1 multi-player online
role-playing game franchise, World of Warcraft, which currently has
over 9.3 million subscribers worldwide. Blizzard’s World of Warcraft,
Warcraft(R), StarCraft(R) and Diablo(R) games account for four of the
top-five best-selling PC game titles of all time. Vivendi Games also
owns popular franchises, including Crash Bandicoot(TM) and Spyro(TM).
Pro forma for calendar 2007, Activision Blizzard expects to generate
approximately 70% of its revenues from owned franchises. As a result
of the business combination, Activision Blizzard expects to have the
most diversified and broadest portfolio of interactive entertainment
assets in its industry, positioning the combined company to capitalize
on the continued worldwide growth in interactive entertainment.

Jean-Bernard Levy, Chairman of the Management Board and Chief
Executive Officer of Vivendi stated: “This alliance is a major
strategic step for Vivendi and is another illustration of our drive to
extend our presence in the entertainment sector. By combining
Vivendi’s games business with Activision, we are creating a worldwide
leader in a high-growth industry. We are excited about the
opportunities for Activision Blizzard as a broader entertainment
software platform. We believe this transaction will create significant
value for Activision Blizzard and Vivendi stockholders. In Activision,
we have found a partner with a highly complementary business and
strong operating team. Bobby Kotick and Brian Kelly are industry
pioneers, well known for creating shareholder value. The combined
strength of the existing management teams at both companies will set
the stage for further profitable growth of Activision Blizzard. We
look forward to being an active and supportive majority stockholder in
a company that is poised to lead the worldwide interactive
entertainment industry in the years ahead.”

Rene Penisson, Member of the Management Board of Vivendi and current
Chairman of Vivendi Games, added: “We are very confident that by
combining forces, Activision Blizzard will set the highest standards
in quality, reputation and profitability, and will bring together the
best creative teams in the industry. The combination of this unique
product portfolio with highly professional employees gives us great
confidence in the growth prospects for Activision Blizzard.”

Said Robert Kotick, Activision’s Chairman and Chief Executive Officer:
“This is an outstanding transaction for Activision and our
stockholders, as well as a pivotal event in the continuing
transformation of the interactive entertainment industry. By combining
leaders in mass-market entertainment and subscription-based online
games, Activision Blizzard will be the only publisher with leading
market positions across all categories of the rapidly growing
interactive entertainment software industry and reach the broadest
possible audiences. By joining forces with Vivendi Games, we will
become the immediate leader in the highly profitable online games
business and gain a large footprint in the rapidly growing Asian
markets, including China and Korea, while maintaining our leading
operating performance across North America and Europe. Activision
stockholders will benefit from significantly increased earnings power
and the recurring nature and predictability of subscription-based
revenues, while also having the opportunity, if they choose, to
receive $27.50 per share for a portion of their shares in the
post-closing tender offer.”

Kotick continued: “Vivendi Games provides Activision with unique
strategic and financial benefits and will allow us to leverage our
franchises into emerging online opportunities as Blizzard has done so
successfully. Activision has been very focused on margin expansion,
and this transaction will meaningfully increase our overall operating
margins as we expand our franchises online and in new geographies.
Diversifying our revenue base among subscription-based online, console
and PC formats, as well as wireless and casual emerging opportunities,
gives us the broadest platform to capitalize on industry growth. With
Blizzard’s successful franchises, such as World of Warcraft, StarCraft
and an exciting pipeline of yet-to-be announced titles, Vivendi Games’
and Blizzard’s management team will join with Activision’s strong and
experienced leaders to become an even more powerful force for
innovation in online and offline interactive entertainment across a
wide range of platforms. This transaction also provides a unique
relationship with Universal Music Group – the world’s largest music
company – which will benefit Guitar Hero and further extend our
sizable leadership position in music-based games.”

Mike Morhaime, President and Chief Executive Officer of Blizzard,
added: “Blizzard’s industry-leading PC games business, with a track
record of nine consecutive bestsellers and a global subscriber base of
more than 9.3 million World of Warcraft players, is an exceptional fit
for Activision’s highly profitable console games business. From our
interactions with the Activision team, it is clear we have much in
common in terms of our approaches to game development and publishing.
Above all, we are looking forward to continue creating great games for
Blizzard gamers around the world, and we believe this new partnership
will help us to do that even better than before.”

Structure & Terms of Transaction

Under the terms of the agreement, Vivendi Games will be merged with a
wholly owned subsidiary of Activision. In the merger, shares of
Vivendi Games will be converted into 295.3 million new shares of
Activision common stock. Based on the transaction price of $27.50 per
share of Activision common stock, this implies a value of
approximately $8.1 billion for Vivendi Games. Concurrently with the
merger, Vivendi will purchase 62.9 million newly issued shares of
Activision common stock at a price of $27.50 per share – a premium of
31% to Activision’s average closing price over the past 20 trading
days – for a total of $1.7 billion in cash. As a result of these
transactions, Vivendi will own an approximate 52% ownership stake in
Activision Blizzard on a fully diluted basis.

Within five business days after closing the transaction, Activision
Blizzard will launch a $4 billion all-cash tender offer to purchase up
to 146.5 million Activision Blizzard common shares at $27.50 per
share. The tender offer will be funded by Activision Blizzard’s cash
on hand at closing, including the $1.7 billion in cash received from
the Vivendi share purchase. In addition, Vivendi has agreed to acquire
from Activision Blizzard additional newly issued shares for up to an
additional $700 million of Activision common stock at $27.50 per
share, the proceeds of which would also be used to fund the tender
offer. Any remaining funds required to complete the tender offer will
be borrowed by Activision Blizzard from Vivendi or third-party
lenders. If the tender offer is fully subscribed, Vivendi will own an
approximate 68% ownership stake in Activision Blizzard on a fully
diluted basis.

The transaction is expected to be immediately accretive in its first
year post-closing for Activision’s stockholders and slightly accretive
for Vivendi’s stockholders. Activision Blizzard is targeting pro forma
operating income of $1.1 billion and pro forma earnings per share
(EPS) in excess of $1.20 in calendar year 2009. The transaction is
expected to be at least $0.20 accretive to Activision stockholders in
calendar year 2009.

Governance

Activision Blizzard’s board of directors will be comprised of eleven
members: six directors designated by Vivendi, two Activision
management directors and three independent directors who currently
serve on Activision’s board of directors. Rene Penisson, currently a
member of the Management Board of Vivendi and Chairman of Vivendi
Games, will serve as Chairman of Activision Blizzard. Brian Kelly,
currently Co-Chairman of Activision, will serve as Co-Chairman of
Activision Blizzard. The three independent directors will be Richard
Sarnoff, Robert J. Corti and Robert Morgado. Other Activision Blizzard
directors will be Robert Kotick (President and Chief Executive Officer
of Activision Blizzard), Bruce Hack (Vice-Chairman and Chief Corporate
Officer of Activision Blizzard), Jean-Bernard Levy (Chairman of the
Management Board and Chief Executive Officer of Vivendi), Doug Morris
(Chairman and Chief Executive Officer of the Universal Music Group),
Philippe Capron (Member of the Management Board and Chief Financial
Officer of Vivendi), and Frederic Crepin (Senior Vice President, Head
of Legal, Vivendi).

Management

Following the completion of the transaction, Robert Kotick will be
President and Chief Executive Officer of Activision Blizzard. Bruce
Hack, current Chief Executive Officer of Vivendi Games, will serve as
Vice-Chairman and Chief Corporate Officer of Activision Blizzard,
accountable for leading the merger integration and the finance, human
resources and legal functions. Mike Griffith will serve as President
and Chief Executive Officer of Activision Publishing, which after
closing will include the Sierra Entertainment, Sierra Online and
Vivendi Games Mobile divisions in addition to the Activision business.
Mike Morhaime will continue to serve as President and Chief Executive
Officer of Blizzard Entertainment. Thomas Tippl, currently Chief
Financial Officer of Activision, will be appointed Chief Financial
Officer of Activision Blizzard and Jean-Francois Grollemund, currently
Chief Financial Officer of Vivendi Games, will be appointed Chief
Accounting Officer of Activision Blizzard.