Vivendi’s board will meet today to sign off on whether or not to push Activision Blizzard into debt in order to finance its own operations, according to Wall Street rumours.
The Wall Street Journal cites anonymous sources familiar with the matter in reporting a board meeting scheduled for Monday.
Vivendi, which has a controlling majority of board seats and a 61% stake in the twin publisher, would receive $2 billion if Activision Blizzard made a $3 billion dividend pay out.
Recent SEC filings show that $2.7 billion of Activision’s $4.3 billion in cash and equivalents is held offshore, and would be heavily taxed if brought home to the US for a dividend. To make the payout, Activision Blizzard would have to go into debt, as it doesn’t have that much cash on hand – but Vivendi’s credit rating would be unaffected by its child’s borrowing.
Sources said Activision Blizzard brass are not at all pleased by the proposal, and that CEO Bobby Kotick has in the past attempted to buy the company away from its French overlord, without success. Others said Vivendi hasn’t made up its mind yet, but that Activision Blizzard is on board the plan.
The proposed cash grab was first reported early in July. At the time, it was believed that Vivendi would have to move fast to pre-empt a contract change making it difficult to extract the cash without the approval of Activision Blizzard’s board.
Vivendi is a multi-faceted international conglomerate with diverse interest in media and communications. It is said to be planning to use the Activision Blizzard pay out in conjunction with the sale of a telco subsidiary to slash its €13.19 billion ($17.3 billion) net debt, in turn enabling it to move forward with plans to restructure without risk of further damage to its credit rating.
Vivendi made several attempts to sell Activision Blizzard, but was unable to find a buyer; it’s hard to imagine who would be in a position to shell out for one of the industry’s two largest publishers, and have the expertise not to run it into the ground.
Activision Blizzard is something of a financial favourite, although if it has to go into debt to the tune of $1 billion that is likely to change – until the next Call of Duty or Skylanders release burns up the charts.