Activision and Vivendi today announced that they have signed a definitive agreement to combine Vivendi Games, Vivendi's interactive entertainment business with Activision, creating the world's largest pure-play online and console game publisher. The new company, 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 is best known for its top-selling franchises, including Guitar Hero, Call of Duty and the Tony Hawk series, as well as Spider-Man, X-Men, Shrek, James Bond and TRANSFORMERS and id's Quake and Doom franchises. Blizzard Entertainment, a division of Vivendi Games, has projected calendar 2007 revenues of $1.1 billion, operating margins of over 40% and approximately $520 million of operating profit. Blizzard owns the #1 multi-player online role-playing game franchise, World of Warcraft, which 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. For calendar 2007, Activision Blizzard expects to generate approximately 70% 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 capitalize on the continued worldwide growth in interactive entertainment.

Under the terms of the agreement, Vivendi Games will be merged with a wholly owned subsidiary of Activision. In the merger, shares of Vivendi Games will be converted into 295.3 million new shares of Activision common stock. Based on the transaction price of $27.50 per share of Activision common stock, this implies a value of approximately $8.1 billion for Vivendi Games. Concurrently with the merger, Vivendi will purchase 62.9 million newly issued shares of Activision common stock at a price of $27.50 per share - a premium of 31% to Activision's average closing price over the past 20 trading days - for a total of $1.7 billion in cash. As a result of these transactions, Vivendi will own an approximate 52% ownership stake in Activision Blizzard on a fully diluted basis.

Within five business days after closing the transaction, Activision Blizzard will launch a $4 billion all-cash tender offer to purchase up to 146.5 million Activision Blizzard common shares at $27.50 per share. The tender offer will be funded by Activision Blizzard's cash on hand at closing, including the $1.7 billion in cash received from the Vivendi share purchase. In addition, Vivendi has agreed to acquire from Activision Blizzard additional newly issued shares for up to an additional $700 million of Activision common stock at $27.50 per share, the proceeds of which would also be used to fund the tender offer. Any remaining funds required to complete the tender offer will be borrowed by Activision Blizzard from Vivendi or third-party lenders. If the tender offer is fully subscribed, Vivendi will own an approximate 68% ownership stake in Activision Blizzard on a fully diluted basis.

Activision Blizzard's board of directors will be comprised of eleven members: six directors designated by Vivendi, two Activision management directors and three independent directors who currently serve on Activision's board of directors. Rene Penisson, currently a member of the Management Board of Vivendi and Chairman of Vivendi Games, will serve as Chairman of Activision Blizzard. Brian Kelly, currently Co-Chairman of Activision, will serve as Co-Chairman of Activision Blizzard. The three independent directors will be Richard Sarnoff, Robert J. Corti and Robert Morgado. Other Activision Blizzard directors will be Robert Kotick (President and Chief Executive Officer of Activision Blizzard), Bruce Hack (Vice-Chairman and Chief Corporate Officer of Activision Blizzard), Jean-Bernard Levy (Chairman of the Management Board and Chief Executive Officer of Vivendi), Doug Morris (Chairman and Chief Executive Officer of the Universal Music Group), Philippe Capron (Member of the Management Board and Chief Financial Officer of Vivendi), and Frederic Crepin (Senior Vice President, Head of Legal, Vivendi).

Following the completion of the transaction, Robert Kotick will be President and Chief Executive Officer of Activision Blizzard. Bruce Hack, current Chief Executive Officer of Vivendi Games, will serve as Vice-Chairman and Chief Corporate Officer of Activision Blizzard, accountable for leading the merger integration and the finance, human resources and legal functions. Mike Griffith will serve as President and Chief Executive Officer of Activision Publishing, which after closing will include the Sierra Entertainment, Sierra Online and Vivendi Games Mobile divisions in addition to the Activision business. Mike Morhaime will continue to serve as President and Chief Executive Officer of Blizzard Entertainment. Thomas Tippl, currently Chief Financial Officer of Activision, will be appointed Chief Financial Officer of Activision Blizzard and Jean-Francois Grollemund, currently Chief Financial Officer of Vivendi Games, will be appointed Chief Accounting Officer of Activision Blizzard.

The transaction is subject to the approval of Activision's stockholders and the satisfaction of customary closing conditions and regulatory approvals. The companies expect the transaction to be completed in the first half of calendar year 2008.