Posted on July 22, 2013, Ian Miles Cheong Report: Vivendi Planning To Force $3B Dividend From Activision
Activision Blizzard may be in for a fight with parent company Vivendi SA, as the French multimedia giant has devised a plan to pay down part of its enormous debt using money from the Call of Duty publisher’s assets.
Vivendi currently has a staggering $17.3 billion in outstanding debts, severely complicating plans to spin off sections of the company and focus on its various media enterprises. As part of the effort to resolve this issue, The Wall Street Journal reports that Vivendi is considering voting to extract a $3 billion dividend from Activision Blizzard. The move would provide Vivendi, which owns 61 percent of the publisher, with $2.3 billion. The plan will be presented today during a meeting of Vivendi’s Board of Directors.
This could create serious complications for Activision Blizzard, aside from the matter of deducting nearly half of the company’s cash on hand. Activision reported over $4 billion in cash assets for the fiscal year ending last March, but half of that amount is held in offshore accounts, in order to shield the company from substantial US taxes. If Activision Blizzard accesses the money in order to pay the dividend to Vivendi, those taxes will have to be paid, likely after the money has changed hands. If so, the publisher might be forced to take on new debt itself in order to pay out the dividend.
You’ll recall that just last year, Vivendi was planning to deal with its debt by selling its stake in Activision Blizzard. At the time, we noted that the sale would have given Vivendi a one-time infusion of cash, but would have done nothing to address the company’s larger woes. With Activision Blizzard’s profitability undisputed, it would appear that Vivendi has decided instead to bleed, rather than kill the golden goose.
This puts Activision Blizzard in a difficult position, which explains why there is a corresponding rumor that CEO Bobby Kotick wants to buy out Vivendi’s stake in the company himself. Unfortunately, multiple reports suggest Vivendi isn’t open to that option. And while Activision Blizzard’s Board of Directors will have to approve the dividend payment, Vivendi’s majority stake makes passage of the deal likely.
We are reaching out to Activision Blizzard for comment, and will update this story as it develops.