Activision may be forced by majority shareholder Vivendi to pay billions of dollars in a special dividend, according to a report in the Wall Street Journal. Vivendi was the original owner of Blizzard, and owns 61 percent of Activision after the deal in which Activision acquired Blizzard. One of the terms of that deal was a clause that said Viviendi could not cause Activision to have debt of more than $400 million without approval of Activision’s independent directors. That clause expired at the beginning of July.
Vivendi is considering a vote that would pull roughly $3 billion from Activision’s cash reserves, which would net Vivendi about $2 billion due to its 61 percent share of Activision. Activision’s cash on hand (reported during the last earnings call) is $4.6 billion, of which $2.7 billion is held overseas. A payout would potentially require Activision to pay taxes on some of that cash, and the overall effect would be to substantially reduce the assets Activision might use for acquisition or major development projects.
Vivendi has a reported $17.3 billion in debt, which it hopes to substantially pay down by drawing cash from Activision and selling its stake in North African phone operator Maroc Telecom for approximately $5.5 billion. Activision was rumored to be considering buying itself back from Vivendi last year, and that still may be on the table. Such a deal would also mean a substantial reduction in Activision’s cash and a large amount of borrowing.
Meanwhile, Activision has yet to schedule its earnings call for the quarter ending June 30, which normally would take place by the beginning of August. It may be that Activision is waiting to schedule that until the financial picture ahead becomes clearer.
Source: Wall Street Journal
