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The 2-Part Deal that Could Benefit Video Game Investors

Ben Popkin
October 14, 2013

In July, Activision Blizzard (NASDAQ: ATVI) reached an agreement with Vivendi (NASDAQOTH: VIVHY) to buy 601 million shares of Activision's stock for roughly $8.2 billion. Since then, the agreement has been put on hold due to a lawsuit by two shareholders who claim that the Activision board will improperly benefit from the deal. But what does the deal mean for you as an investor?

The two part deal
Vivendi will sell its shares of Activision in two segments. First, Activision will acquire 429 million shares from the French company at a discount for $13.60 per share, for a total of roughly $5.8 billion. Activision will use a combination of its cash and new debt to pay for these shares.

This is good for shareholders because Activision will retire a majority of the 429 million shares upon purchase, which will reduce the total number of shares outstanding. In turn, this will raise the company's earnings per share, just like any other stock buyback.

The company will add $4.6 billion of debt to help pay for the agreement. This will allow the company to keep $3 billion in cash