Video game developer, Activision Blizzard (ATVI) recently priced 41.5 million shares, which its one-time majority shareholder Vivendi intends to offer in the secondary market. Vivendi is expected to receive $850.0 million for the 5.8% stake. The offer is set to close on May 28, 2014.
Earlier, in Oct 2013, Activision and ASAC II LP, an investment group acquired 601 million shares (approximately 88.0% stake in Activision) from Vivendi for approximately $8.17 billion. Post the current offering, Vivendi will have 5.8% remaining stake in Activision, which it intends to eventually sell after the expiration of the 15-month restriction period.
Although the current deal does not affect Activision financially, it gives a lot of freedom to the company’s management in decision making. Vivendi’s lower stake will help the current management to operate freely and take necessary steps that will boost shareholders' wealth.
Activision is expected to benefit from a strong product pipeline in 2014. The company, in partnership with Tencent, is set to bring Call of Duty to China, both on the PC as well as a free-to-play-game.
In the third quarter of 2014, Activision plans to release Destiny which is believed to be the biggest video-game IP launch in history. The fourth quarter will witness the launch of Skylanders: Trap Team and Call of Duty: Advanced Warfare.
These are expected to drive top-line growth in 2014. However, intensifying competition from the likes of Electronic Arts (EA), Take-Two Interactive (TTWO) and Zynga Inc (ZNGA) remains a major concern. Additionally, Activision’s limited presence in the mobile gaming segment is a headwind.
Further, the continued strong demand for new consoles is expected to remain an overhang on overall software sales, which will hurt Activision’s top-line growth in the near term. Moreover, higher marketing expenses related to Destiny and the Call of Duty game launch will keep margins under pressure in 2014.
Currently, Activision Blizzard has a Zacks Rank #3 (Hold).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment