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Telecommunications and multimedia conglomerate Vivendi wants to get its hands on the cash that publisher Activision is hording. Vivendi owns a 61 percent stake in Activision, and its slipping profits on the telecom side of its business and mounting debt are forcing it to look for cash to address its immediate needs.

That’s where Activision comes in. Vivendi has long been looking to force Activision to offer a special one-time dividend to its investors. As the majority stakeholder, that means Vivendi would get the bulk of the cash in any payout. Only Vivendi is running into trouble with Activision’s board despite owning six of the 11 seats.

According to the rules of the merger that saw Activision bond with Vivendi subsidiary Blizzard five years ago, the board also hosts three independent members that have special veto powers that can override a majority vote from the Vivendi board members.

“Vivendi cannot compel a dividend without the consent of two of the three independent directors,” Wedbush analyst Michael Pachter wrote in a note to investors in May. “We believe such assent has not been forthcoming. In our view, Vivendi has approached Activision about levering up its balance sheet and paying a large dividend, and Activision has likely balked at the idea. We believe that Activision management prefers not to be financially constrained, and paying out a large dividend after incurring a high debt balance would limit Activision’s ability to grow its business going forward.”


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One possible scenario would have Vivendi forcing Activision to borrow around $5 billion dollars. The publisher already has around $4 billion on hand. Vivendi would then, in this scenario, force Activision to pay out a one-time dividend of $8.5 billion, which would leave the game maker with $500 million to make games and inject $5.2 billion of cash directly into Vivendi’s balance sheet.

As of today, Vivendi can’t compel the board to agree to that, but tomorrow is very different.

Tomorrow is the five-year anniversary of Activision’s merger with Blizzard. It is also the expiration date for the rule that Vivendi must get approval of the three independent board members. Starting tomorrow, July 9, Vivendi can force Activision to pay the dividend without issues.

Vivendi might attempt exactly that, according to a report from the Financial Times (as spotted by Reuters). The paper cited anonymous sources that claim the corporation is waiting for the expiration of the board rules to make its move.

We’ve reached out to Activision and Vivendi, but neither organization responded to our request for a comment.

This tactic is an alternative to Vivendi selling off its stake in Activision. First, not a lot of corporations are looking into taking on a 61 percent stake in a gigantic gaming publisher. Second, Vivendi doesn’t really want to get rid of Activision. Vivendi is attempting to turn away from telecom in favor of its multimedia businesses. In addition to game publishing, the conglomerate also owns a stake in Universal Music Group and television-production company Canal+.

Another possible scenario would have Vivendi extracting cash from Activision through a share-buyback program with the publisher. The gaming company could make a debt offer to raise around $5 billion to buy back stock at a premium price. Vivendi would then get some cash out of the company by returning 11 percent of its Activision stock. This would still leave it with 50 percent of the company, and Activision could retire those shares and any other shares that other investors return.

Activision would prefer the buyback procedure, but if it’s made the offer to Vivendi, whatever price it is offering to buy back the stocks at isn’t impressing the multimedia company.

“In our view, the two sides are at an impasse, with Activision management preferring status quo or a [buyback], and with Vivendi management preferring a leveraged large dividend,” wrote Pachter. “We think that reports of the two sides failing to reach agreement on price are close to the mark, with Activision likely offering a below market tender in order to buy even more Vivendi-held shares, and with Vivendi seeking an above market tender that maximizes the value of its holdings. We think that Vivendi can hold out until July 9, vote for a leveraged dividend, and wait until Activision management responds with an above market tender offer.”

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