(3 December 2007 4:00 pm)

MUMBAI: Vivendi will pay $9.8 billion to merge its games unit with Activision Inc. and take a controlling stake in the new entity called Activision Blizzard.

By combining Vivendi Games, this will create the world's largest pure-play online and console game publisher. Activision is an independent publisher of interactive entertainment.

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's franchises include Guitar Hero, Call of Duty and the Tony Hawk series, as well as Spider-Man, X-Men, Shrek, James Bond and Transformers. Blizzard Entertainment, a division of Vivendi Games, has projected 2007 revenues of $1.1 billion, operating margins of over 40 per cent and approximately $520 million of operating profit.

Blizzard's multi-player online role-playing game franchise, World of Warcraft currently has over 9.3 million subscribers worldwide. Blizzard’s World of Warcraft, Warcraft, StarCraft and Diablo 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 and Spyro. Pro forma for calendar 2007, Activision Blizzard expects to generate approximately 70 per cent 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 capitalise on the continued worldwide growth in interactive entertainment.

Vivendi CEO Jean-Bernard Lévy says, “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.”

Vivendi Games chairman René Penisson says, “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.”

Activision chairman and CEO Robert Kotick says, “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.

"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 focussed 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.”

Blizzard president and CEO Mike Morhaime says, "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.”