Meanwhile Take-Two is taking a huge beating as everyone and their mother tries desperately to sell the shares the figured EA was going to to buy. At $21.89 as of the previous close, shares are as of right now trading for $16.43, or nearly 25% lower than they were before talks were officially halted.

I'd say that Take-Two's faithful stockholders are getting shafted here, but I doubt there are very many faithful stockholders left out there at this point.

Take-Two Falls After Electronic Arts Ends Merger Bid [Bloomberg]

Umm. Do Ninjas wear cloaks? Perhaps the metaphor breaks down a bit at that point.

No matter - the point is that EA has entered into a confidentiality agreement with Take-Two and both parties are now obliged to keep their lips tightly zipped with regard to the companies ongoing discussions.

Following the FTC's announcement last week that they would not oppose any merger, EA decided not to renew the formal bid and has been having some cosy chats with its new friends at Take-Two.

Cosy chats that from now on we will not be party to. Bah.

EA: We Might Be Talking To Take-Two, We Might Not. But We're Not Talking About It Publicly Anymore [Sillicon Alley Insider]

Upon further review of this matter, it now appears that no additional action by the Commission is warranted at this time. Accordingly, the investigation has been closed.

So.. essentially EA are free to pursue their merger. Or would be, had they not let their bid expire on Monday.

With the FTC investigation put to bed, though, EA are now able to enter into private negotiations with Take Two. Take Two is now to give EA its three-year financial forecasts and the game will continue...

An EA merger with Take-Two gets U.S. antitrust OK [Reuters via GamePolitics]

Activision Blizzard CFO Thomas Tippl told MCV that it'd largely be business as usual for Blizzard. "It’s not like we need to go there and fix something," he said. "Blizzard will continue to operate as they have done in the past – fairly independently."

"It would be a big mistake for us to distract them with new ideas."

However, Tippl did mention to MCV one new use the company has in mind for Blizzard:

However, Tippl did drop a big hint that established Activision brands from the West would be introduced to Eastern markets by Blizzard – and would be boosted by the firm’s reputation and expertise.

“There are some opportunities we will be exploring there, especially relating to their expertise in Asia,” he said.

“If you consider that Guitar Hero is not in Asia yet and that the only way to create a business there is figuring out ways to work in internet cafes, etc., we hope to benefit from their expertise.”

‘Activision-Vivendi deal will not affect Blizzard’ [MCV]

The merger was first announced in December of 2007, but has just now been finalized. Through it, Blizzard and Sierra parent Vivendi becomes a wholly-owned subsidiary of Activision, scoring 295.3 new shares of Activision stock. It'll also buy 62.9 million new shares for a total of $1.7 billion - the result is that Vivendi owns a stake of about 52 percent in its new parent company.

Santa Monica-based Activision's new name will officially be Activision Blizzard, a moniker change also approved by the shareholders today, but it'll continue to trade on the NASDAQ under its same symbol, ATVI.

Full details after the jump.

Activision Stockholders Approve Combination with Vivendi Games

SANTA MONICA, Calif., Jul 08, 2008 (BUSINESS WIRE) — Activision, Inc. (Nasdaq: ATVI) today announced that, at a special meeting of stockholders held earlier today, it received the stockholder approval necessary to consummate the company's agreement with Vivendi, S.A. to combine Vivendi Games, Vivendi's interactive entertainment business, with Activision's businesses. All of the proposals required to effect the transaction received more than 92 percent of the shares voted. The transaction is expected to close on or around July 9, 2008.

Activision and Vivendi Games will combine their businesses through the merger of a newly formed, wholly-owned subsidiary of Activision with and into Vivendi Games. As a result of the merger, Vivendi Games, the parent company of Blizzard Entertainment and Sierra, will become a wholly-owned subsidiary of Activision. Vivendi will receive approximately 295.3 million newly issued shares of Activision common stock. Concurrently with the merger, Vivendi will purchase approximately 62.9 million newly issued shares of Activision common stock at a price of $27.50 per share for a total of approximately $1.7 billion in cash, resulting in a total Vivendi ownership stake in Activision Blizzard of approximately 52% on a fully diluted basis and approximately 54% of shares outstanding. As of the 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.

Headquartered in Santa Monica, California, Activision Blizzard, Inc. is a worldwide pure-play online and console game publisher with leading market positions across all categories of the rapidly growing interactive entertainment software industry.

Activision Blizzard maintains operations in the U.S., Canada, the United Kingdom, France, Germany, Ireland, Italy, Sweden, Spain, Norway, Denmark, the Netherlands, Romania, Australia, Chile, India, Japan China, the region of Taiwan and South Korea. More information about Activision Blizzard and its products can be found on the company's website, www.activisionblizzard.com.

Cautionary Note Regarding Forward-looking Statements: Information in this press release that involves Activision Blizzard's expectations, plans, intentions or strategies regarding the future are forward-looking statements that are not facts and involve a number of risks and uncertainties. In this release, they are identified by references to dates after the date of this release and words such as "outlook", "will," "remains," "to be," "plans," "believes", "may", "expects," "intends," and similar expressions. Factors that could cause Activision Blizzard's actual future results to differ materially from those expressed in the forward-looking statements set forth in this release include, but are not limited to, sales of Activision Blizzard's titles in its fiscal year 2009, shifts in consumer spending trends, the seasonal and cyclical nature of the interactive game market, Activision Blizzard's ability to predict consumer preferences among competing hardware platforms (including next-generation hardware), declines in software pricing, product returns and price protection, product delays, retail acceptance of Activision Blizzard's products, adoption rate and availability of new hardware and related software, industry competition, rapid changes in technology and industry standards, protection of proprietary rights, maintenance of relationships with key personnel, customers, vendors and third-party developers, domestic and international economic, financial and political conditions, foreign exchange rates, integration of recent acquisitions and the identification of suitable future acquisition opportunities, , the Activision Blizzard's success in integrating the operations of Activision and Vivendi Games in a timely manner, or at all, and the combined company's ability to realize the anticipated benefits and synergies of the transaction to the extent, or in the timeframe, anticipated. Other such factors include the further implementation, acceptance and effectiveness of the remedial measures recommended or adopted by the special sub-committee of independent directors established in July 2006 to review historical stock option granting practices by Activision Blizzard and its board of directors, the finalization of the tentative settlement of the SEC's formal investigation and final court approval of the proposed settlement of the derivative litigation filed in July 2006 against certain current and former directors and officers of Activision Blizzard relating to Activision Blizzard's stock option granting practices, and the possibility that additional claims and proceedings will be commenced, including additional action by the SEC and/or other regulatory agencies, and other litigation unrelated to stock option granting practices and any additional risk factors identified in Activision Blizzard's most recent annual report on Form 10-K and quarterly reports on Form 10-Q and the definitive proxy statement filed on June 6, 2008 in connection with the proposed transaction with Vivendi. The forward-looking statements in this release are based upon information available to Activision Blizzard as of the date of this release, and Activision Blizzard assumes no obligation to update any such forward-looking statements. Forward-looking statements believed to be true when made may ultimately prove to be incorrect. These statements are not guarantees of the future performance of Activision Blizzard and are subject to risks, uncertainties and other factors, some of which are beyond its control and may cause actual results to differ materially from current expectations.

"We believe the transaction is set to create a formidable new digital media powerhouse and the most valuable interactive entertainment company worldwide, unlocking the value of industry juggernaut World of Warcraft, and possibly also setting a new benchmark for profit margins among publicly traded video game pure-plays"

Along with the rosy outlook, Sebastian is raising the company's target price (the price at which buyers will purchase the stock) from $33 to $40.

Activision Blizzard formation set for July 8 [GamesIndustry.biz]

The Commission said for "all categories of game software, the combined firm would continue to face several strong, effective competitors, such as Electronic Arts, and the game console manufacturers, such as Sony, Nintendo and Microsoft".

EU approves Vivendi-Activision deal [Reuters - Thanks Thibaud!]

TAKE-TWO INTERACTIVE SOFTWARE'S BOARD REJECTS ELECTRONIC ARTS' UNSOLICITED PROPOSAL AS INADEQUATE

New York, NY - February 24, 2008 —The Board of Directors of Take-Two Interactive Software, Inc. (NASDAQ:TTWO) today confirmed that it has received an unsolicited proposal from Electronic Arts Inc. (NASDAQ:ERTS) to acquire Take-Two for $26.00 per share in cash. Take-Two's Board of Directors has thoroughly reviewed EA's unsolicited proposal with the assistance of its independent financial and legal advisors and concluded that the proposal is inadequate in multiple respects and not in the best interests of Take-Two's stockholders.

After careful evaluation, the Board has determined that EA's proposal substantially undervalues Take-Two's robust and enviable stable of game franchises, exceptional creative talent and strong consumer loyalty. We believe EA's unsolicited offer is highly opportunistic and is attempting to take advantage of our upcoming release of Grand Theft Auto IV, one of the most valuable and durable franchises in the industry. Furthermore, the offer values the Company at a significant discount to its public peers and does not compensate Take-Two for its intrinsic value and the substantial synergies that the proposed combination would create.

Strauss Zelnick, Executive Chairman of the Board of Take-Two commented, "Electronic Arts' proposal provides insufficient value to our shareholders and comes at absolutely the wrong time given the crucial initiatives underway at the Company. Thanks to the extraordinary efforts of our creative and business teams, Take-Two has made enormous strides in the past 10 months toward our common goal of being the most creative, innovative and efficient company in our industry. We're extremely proud of our unique portfolio of game franchises, exceptional creative talent and loyal consumer following. Our Board believes that we will build greater value for our stakeholders by remaining relentlessly focused on our strategy and delivering on our mission of making the highest quality interactive entertainment."

Mr. Zelnick continued, "In addition to undervaluing key elements of our business, EA's proposal fails to recognize the value we are building through our ongoing turnaround efforts, which will further revitalize Take-Two. While we have made substantial progress already, the turnaround of our business which we initiated in June is not yet complete, and we believe its benefits have not been recognized in either our current stock price or in the value of EA's proposal."

Mr. Zelnick added, "While the Board believes that entering into discussions with EA at this time is not in the best interests of shareholders, we had offered to enter into a good-faith dialogue with EA to determine if our companies can reach common ground on the appropriate value of Take-Two as a first step to realizing a mutually beneficially transaction. However, given the great importance of the Grand Theft Auto IV launch to the value of Take-Two, the Board has determined that the only prudent and responsible course for our Company and its stockholders is to defer these discussions until immediately after Grand Theft Auto IV is released. Therefore, we offered to initiate discussions with EA on April 30th, 2008 (the day after Grand Theft Auto IV is scheduled to release). We believe this offer demonstrated our commitment to pursuing all avenues to maximize stockholder value, while we believe that EA's refusal to entertain this path is evidence of their desire to acquire Take-Two at a significant discount, whereas we believe this value rightly belongs to our stockholders."

Take-Two has a proven track record of creating and acquiring ownership of valuable new intellectual property. Grand Theft Auto is one of the industry's top franchises, having sold more than 65 million units to date. Over the past year, Take-Two has continued to expand its owned intellectual property portfolio, with two new franchises established - BioShock, one of the highest rated games of all time and winner of numerous "Game of the Year" awards, which has sold over 2 million units to date - and Carnival Games, a casual game for the Wii™, which has sold over 1 million units to date. Take-Two's other proven million-unit selling video game franchises include Midnight Club, Sid Meier's Civilization, Bully, Red Dead Revolver, Max Payne, Rockstar Games presents Table Tennis, Manhunt, Red Dead Revolver, Mafia, The Darkness, Spec Ops, Sid Meier's Railroads! and Sid Meier's Pirates! Take-Two also has powerful and growing sports franchises, with licenses for leading brands, including Major League Baseball® 2K, NBA® 2K and NHL® 2K, and proprietary sports brands, such as Top Spin, All Pro Football and Don King Presents: Prizefighter. Additionally, Take-Two has a partnership with Nickelodeon to publish video games based on top rated Nick Jr. titles such as Dora the Explorer and Go, Diego, Go!

Ben Feder, Chief Executive Officer of Take-Two, commented, "The revitalization of Take-Two is well underway. In the last year, we have accomplished a great deal in terms of restructuring our cost base to improve margins, addressing the legacy issues that have weighed on our business, and enhancing our creative output through organic and external initiatives. We believe stockholders will reap the benefits of these actions both in the near and long term and that our efforts will create greater value for stockholders than what is being offered by EA at this time."

As part of its turnaround plan, Take-Two has implemented a more streamlined and efficient operating structure, put in place a $25 million cost cutting initiative, instituted a disciplined Product Investment Review Process, restructured international operations to create a more efficient and responsive international organization, consolidated the majority of 2K Games and 2K Sports operations on the West Coast to increase efficiency and better support the growth of these labels, and sold its non-core Joytech business.

To continue to position itself for the future, the Company has begun to more aggressively leverage potential growth opportunities, with the acquisition of Illusion Softworks development studio and the formation of the 2K Play label to focus on the family and casual games market.

In addition, current management has secured a $140 million line of credit, announced a preliminary settlement of the "Hot Coffee" class action and made significant progress in resolving the New York District Attorney and SEC actions that have been pending against Take-Two since June 2006 and July 2006, respectively.

Mr. Feder concluded, "We remain committed to executing our existing business strategy and turnaround plans and to building value for all of our stockholders. We intend to vigorously resist any attempt by EA to acquire Take-Two at a price that does not adequately value our Company and its growth opportunities."

Bear Stearns and Lehman Brothers are acting as financial advisors to Take-Two and Proskauer Rose LLP is acting as a legal advisor.

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval.

For more information, please visit http://www.transactioninfo.com/taketwo/

Take-Two's and EA's letters regarding the proposal are included below.

***
February 6, 2008

Mr. Strauss Zelnick
Chairman of the Board of Directors
Take-Two Interactive Software, Inc.
622 Broadway
New York, NY 10012

Dear Strauss:

Congratulations on your recent announcement about the release date for Grand Theft Auto IV. I am sure it must feel great to have this important title locked and ready.

Further to our recent discussions, this letter is to formally express Electronic Arts Inc's. ("EA") interest in acquiring Take-Two Interactive Software, Inc. ("Take-Two") and to propose a transaction in which EA would acquire all of the outstanding shares of Take-Two common stock for $25 per share payable in cash. We are confident we can consummate a transaction quickly, confidentially and on the terms proposed.

The proposed combination will create significant value for your stockholders. Our offer price provides a substantial premium of 58% over Take-Two's most recent closing price and a 51% premium over Take-Two's 30-day trailing average price. The cash purchase price provides certainty of value to Take-Two's stockholders in today's uncertain economic environment.

We believe that moving quickly to negotiate and conclude our proposed merger is in the best interest of Take-Two and EA. Waiting for a later date leaves open significant uncertainty regarding the timing, the probability and the value of a potential transaction and is not in the best interests of either company or Take-Two's stockholders.

We also believe the proposed merger provides an attractive outcome for Take-Two's employees and business partners. We have a powerful product slate for 2008 and beyond with exciting releases planned for many of EA's well-established franchises as well as important new franchises we are launching such as SPORE, Dead Space, Dragon Age and Mirror's Edge. We feel that Take-Two's IP portfolio is well aligned against EA's product footprint and its studios fit well with our decentralized divisional model. Take-Two's creative teams are an essential part of the Take-Two business, and we believe EA would offer a stable and supportive environment for your studios to focus on developing great new games with the backing of a global games industry leader. We believe EA can and will represent the best home for these teams anywhere in the entertainment world.

We have completed a thorough review of Take-Two's public information and are prepared to move forward immediately to consummate a transaction with minimum disruption to Take-Two. We believe that with adequate access to the necessary information we can complete all required due diligence in approximately 2 weeks. We believe that our due diligence review would require limited access to a small number of senior executives of Take-Two and its legal, accounting and financial advisors. Importantly, no interaction with any of the studio leaders will be required until our other due diligence is completed and the material terms of a transaction are agreed to.

Considerable time and resources have been put forth in developing this offer, and our Board of Directors has approved its delivery to Take-Two. Our offer is not conditioned on any financing requirement. However, our offer is subject to the satisfactory completion of our due diligence review of Take-Two, the negotiation and execution of mutually acceptable definitive transaction agreements and the satisfaction of customary conditions to be set forth in such agreements.

We do not intend to make this letter public and our offer will automatically terminate and be withdrawn in its entirety if any portion of this letter, or the existence of discussions between EA and Take-Two relating to a possible business combination, are disclosed to any person other than the directors and officers of Take-Two and its legal and financial advisors.

We look forward to hearing back from you by the close of business on Friday, February 15, 2008, with a response to our proposal.

I am available to meet and discuss all aspects of this proposal with you and your Board. If you have any questions, please do not hesitate to contact me. I very much look forward to hearing from you and working with you and the Take-Two team to consummate a successful transaction.

Sincerely,

John Riccitiello
Chief Executive Officer

JSR/dal

***
February 15, 2008

Mr. John S. Riccitiello
Chief Executive Officer
Electronic Arts Inc.
209 Redwood Shores Parkway
Redwood City, CA 94065

Dear John:

Thank you for your letter of February 6, 2008. The position of the Board of Directors (the "Board") of Take-Two Interactive Software, Inc. (the "Company") with respect to an acquisition of the Company by Electronic Arts Inc. ("EA") has not changed from that which you and I have previously discussed.

As part of the Board's stated objective of maximizing shareholder value, we have been and remain open to considering a business combination with interested parties at the right time and the right price. However, the Board has concluded that EA's proposal has not been delivered at a time nor does it contemplate a price which is consistent with this objective.

On a personal note, I want to thank you for the courtesy reflected in our prior discussions and also your letter. I look forward to getting to know you better in the future.

Sincerely,

Strauss Zelnick
Executive Chairman of the Board

***
February 19, 2008

Mr. Strauss Zelnick
Executive Chairman of the Board of Directors
Take-Two Interactive Software, Inc.
622 Broadway
New York, NY 10012

Dear Strauss:

Thank you for your letter of February 15, 2008. While I appreciate its courteous tone and value our ongoing dialogue, I am disappointed that you have rejected Electronic Arts Inc.'s ("EA's") $25 per share cash offer to acquire Take-Two Interactive Software, Inc. ("Take-Two") and declined to engage in the friendly negotiations we proposed. We continue to believe that an acquisition of Take-Two by EA is in the best interests of your shareholders, employees and other constituents, and we remain interested in acquiring Take-Two. So, to further demonstrate our seriousness and encourage you to move forward now, I am writing to increase EA's offer to acquire all of the outstanding shares of Take-Two to $26 per share in cash. This offer is subject to Take-Two agreeing by February 22, 2008 to commence negotiation of a definitive merger agreement and to permit EA to commence a limited due diligence review of Take-Two.

Our revised all-cash offer represents a 64% premium over Take-Two's most recent closing price and a 63% premium over Take-Two's 30-day trailing average price (based on prices as of market close on Friday, February 15th). We believe our offer represents a unique and compelling opportunity for Take-Two shareholders to maximize the value of their investment in the company, with materially lower risk than if Take-Two proceeds on a stand-alone basis.
We also believe that the transaction we are proposing represents a uniquely attractive opportunity for Take-Two's creative teams and key employees. EA is a diversified leader with well-established franchises and proven intellectual properties, global reach, and significant financial resources. I know we both agree that Take-Two's talented creative teams deserve a permanent home within a stable and growing publisher that provides these teams an environment to do what they do best - create great games. EA is organized in a four-label model that provides our creative teams the autonomy they need to fully realize their creative ambitions, while also providing a stable and supportive corporate and publishing infrastructure which allows them to best address the global marketplace. We have the resources to make the significant investments in technology and infrastructure needed for the most creative and innovative games in the industry. In short, a combination with EA would provide Take-Two's studios and employees a combination of the right resources for investment and global reach, and the right environment to do their best work.

We believe that Take-Two's shareholders would not be well-served by any further delay in negotiating and completing the proposed merger. While the videogame industry remains an attractive, high-growth business, the challenges and risks in the business are escalating, and the need for scale is becoming more pronounced. Despite steps taken since March 2007, Take-Two remains dependent on a limited number of titles, and has limited capital resources. In addition, Take-Two faces ongoing financial, legal and operating issues and a very intense competitive environment. Given these factors, we believe it will be increasingly difficult for Take-Two to create sustainable shareholder value and that Take-Two remains exposed to considerable risk of value loss.

We also believe that any delay in this proposed transaction works against the interest of Take-Two's shareholders, because:

There can be no certainty that in the future EA or any other buyer would pay the same high premium we are offering today. We place significant value on the ability to close the transaction relatively quickly so that EA's strong publishing and distribution network, including our global packaged goods, online and wireless publishing organizations, can positively impact the catalogue sales of GTA IV and also the launch and sale of titles released later this year. We want to work with you and your team to complete the transaction in time to begin realizing its significant marketplace benefits in advance of this year's holiday selling season.
We believe Take-Two's current share price already reflects investor expectations for a strong release of GTA IV as well as the longer-term issues that Take-Two faces. Once GTA IV ships, Take-Two will again be dependent on less-popular titles and face increasing challenges to compete with larger and better-capitalized competitors.
With GTA IV shipping on April 29, development on this important title must now be essentially complete. We believe now is the right time to complete a transaction with minimal disruption for Take-Two.
We also believe the transaction we are proposing will create value for EA's shareholders. In addition to the top-line benefits noted above, we can achieve bottom-line benefits by combining Take-Two's and EA's corporate and publishing infrastructures and by optimally supporting Take-Two's creative teams and intellectual properties in EA's decentralized label structure.

Considerable thought, time and resources have been put forth in developing this offer, and our Board of Directors unanimously supports it. Our offer is not conditioned on any financing requirement. It is subject to the satisfactory completion of a due diligence review of Take-Two, the negotiation and execution of mutually acceptable definitive transaction agreements, and the satisfaction of customary conditions to be set forth in such agreements. We are prepared to move forward immediately with formal due diligence and the negotiation and execution of a definitive merger agreement and believe that with adequate access to the necessary information and people, we can complete both in approximately two weeks. We believe that our due diligence review can be completed with minimal disruption, requiring only limited access to a small number of senior executives of Take-Two and its legal, accounting and financial advisors. We also have prepared a draft merger agreement that we can forward to you immediately.

Our strong preference is to conduct a private negotiation. If you are unwilling to proceed on that basis, however, we may pursue other means, including the public disclosure of this letter, to bring our offer and the compelling value it represents to the attention of Take-Two's shareholders.

I am available to meet and discuss any and all aspects of this proposal with you and your Board. Again, we believe this proposal represents a unique opportunity to maximize value for Take-Two's shareholders, and that the combined enterprise would be extraordinarily well positioned to build value for our respective customers, employees, developers and other business partners. We hope that you and your Board share our enthusiasm, and we look forward to hearing back from you by February 22.

Sincerely,

John Riccitiello
Chief Executive Officer

***
February 22, 2008

Mr. John S. Riccitiello
Chief Executive Officer
Electronic Arts Inc.
209 Redwood Shores Parkway
Redwood City, CA 94065

Dear John:

Thank you for your letter of February 19, 2008. As you know, the Board of Directors (the "Board") of Take-Two Interactive Software, Inc. ("Take-Two" or the "Company") carefully considered Electronic Arts Inc.'s ("EA's") previous offer of $25 per share and concluded that neither the timing of the proposed acquisition nor the price was consistent with the Board's objective of maximizing stockholder value. The Board's rationale for rejecting EA's prior offer is not altered by your decision to increase that offer by four percent.

I would like to reiterate, in the clearest possible terms, the Board's conviction that this is not the right time for Take-Two to enter into a negotiation to sell the Company. Our organization is keenly focused on the scheduled April 29th launch of Grand Theft Auto IV, and on maximizing the value of the game to the Company and, in turn, our stockholders. It is the Board's strongly held view that beginning strategic discussions now would distract our Company and thereby threaten the value of this key franchise.

While I understand that you may disagree with the Board's reluctance to commence discussions immediately, the Board and I want to assure you that our concerns about timing are genuine. Potential negative financial consequences to Take-Two are significant and we believe outweigh the benefits of commencing discussions at this time. As you know, there is no certainty that EA will actually close on the proposed transaction on mutually agreeable terms, especially since you have proposed a price that we would not accept and have qualified your offer by a diligence request. Moreover, as we have all seen time and again, the process surrounding acquiring a public company from start to finish is complex, uncertain, intrusive and distracting, and we believe it would be especially so to the creative artists at the core of our business and to all those who may be displaced by a transaction.

While the Board is convinced that discussions at this time would be imprudent, we also appreciate the potential benefit of a frank and private dialogue with EA. To that end, the Board would be willing to commit to entering into a good-faith discussion with EA on April 30, 2008 to determine if we can reach common ground on the proper value of the Company and therefore an appropriate, mutually beneficial transaction. This would, of course, be subject to both parties reaching a mutually acceptable confidentiality agreement on customary terms. We are prepared to begin negotiating this confidentiality agreement immediately.

In order to alleviate any concerns you may have about the proposed starting date for these discussions, I would be pleased to meet with you privately as soon as possible to talk on a general basis. In addition our Board would confirm, subject to its fiduciary duties, that from now until April 30, 2008 (the "Quiet Period"), the Company will not pursue negotiations with any other potential strategic partner for a business combination unless we have first contacted you. Further, if the Company receives any bona fide offer to acquire the Company during the Quiet Period that the Board decides to explore, the Company will immediately inform EA and we understand that EA may then act as it sees fit.

I would like to note that if EA chooses to announce publicly the Board's proposal or announce any offer by EA to acquire the Company during this Quiet Period or if the contents of this letter become publicly available in sum and substance, the Company will consider all of its alternatives, including discussions with other parties, and further we will reserve the right to refuse to provide EA access to information or diligence.

John, I believe I know you well enough to rely on your considering this proposal in the same good faith we have in making it. I look forward to your favorable response.

Sincerely,

Strauss Zelnick
Executive Chairman of the Board

it was revealed that Activision and Vivendi management actually got together to discuss a possible merger as far back as November 2006. It wasn't until April and May of last year that talks really heated up, however ....

After going back and forth over certain transaction terms, in June Jean-Bernard Lévy, Chairman and Chief Executive Officer of Vivendi called up Activision head Bobby Kotick "to advise him that, due to the meaningful differences between the two companies' proposals and lack of any apparent progress, he did not think it made sense to continue discussions concerning a possible transaction at that time."

And this goes on and on until we wind up with the announcement that had me reaching for another cup of coffee in December. "The Transaction" section is interesting to page through, if only to get a closer look at how these seemingly out of the blue business transactions come into being.

The Activision Blizzard Deal That Almost Wasn't [GameDaily]

SANTA MONICA, Calif. & PARIS, Dec 02, 2007 (BUSINESS WIRE) —
Activision, Inc. (NASDAQ: ATVI) and Vivendi (Euronext Paris: VIV)
today announced that they have signed a definitive agreement to
combine Vivendi Games, Vivendi's interactive entertainment business —
which includes Blizzard Entertainment's(R) World of Warcraft(R), the
world's #1 multi-player online role-playing game franchise — 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, one of the world's leading independent publishers of
interactive entertainment, is best known for its top-selling
franchises, including Guitar Hero(R), Call of Duty(R) and the Tony
Hawk series, as well as Spider-Man(TM), X-Men(TM), Shrek(R), James
Bond(TM) and TRANSFORMERS(TM). 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(R), StarCraft(R) and Diablo(R) 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(TM) and Spyro(TM).
Pro forma 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.

Jean-Bernard Levy, Chairman of the Management Board and Chief
Executive Officer of Vivendi stated: "This alliance is a major
strategic step for Vivendi and is another illustration of our drive to
extend our presence in the entertainment sector. By combining
Vivendi's games business with Activision, we are creating a worldwide
leader in a high-growth industry. We are excited about the
opportunities for Activision Blizzard as a broader entertainment
software platform. We believe this transaction will create significant
value for Activision Blizzard and Vivendi stockholders. In Activision,
we have found a partner with a highly complementary business and
strong operating team. Bobby Kotick and Brian Kelly are industry
pioneers, well known for creating shareholder value. The combined
strength of the existing management teams at both companies will set
the stage for further profitable growth of Activision Blizzard. We
look forward to being an active and supportive majority stockholder in
a company that is poised to lead the worldwide interactive
entertainment industry in the years ahead."

Rene Penisson, Member of the Management Board of Vivendi and current
Chairman of Vivendi Games, added: "We are very confident that by
combining forces, Activision Blizzard will set the highest standards
in quality, reputation and profitability, and will bring together the
best creative teams in the industry. The combination of this unique
product portfolio with highly professional employees gives us great
confidence in the growth prospects for Activision Blizzard."

Said Robert Kotick, Activision's Chairman and Chief Executive Officer:
"This is an outstanding transaction for Activision and our
stockholders, as well as a pivotal event in the continuing
transformation of the interactive entertainment industry. By combining
leaders in mass-market entertainment and subscription-based online
games, Activision Blizzard will be the only publisher with leading
market positions across all categories of the rapidly growing
interactive entertainment software industry and reach the broadest
possible audiences. By joining forces with Vivendi Games, we will
become the immediate leader in the highly profitable online games
business and gain a large footprint in the rapidly growing Asian
markets, including China and Korea, while maintaining our leading
operating performance across North America and Europe. Activision
stockholders will benefit from significantly increased earnings power
and the recurring nature and predictability of subscription-based
revenues, while also having the opportunity, if they choose, to
receive $27.50 per share for a portion of their shares in the
post-closing tender offer."

Kotick continued: "Vivendi Games provides Activision with unique
strategic and financial benefits and will allow us to leverage our
franchises into emerging online opportunities as Blizzard has done so
successfully. Activision has been very focused on margin expansion,
and this transaction will meaningfully increase our overall operating
margins as we expand our franchises online and in new geographies.
Diversifying our revenue base among subscription-based online, console
and PC formats, as well as wireless and casual emerging opportunities,
gives us the broadest platform to capitalize on industry growth. With
Blizzard's successful franchises, such as World of Warcraft, StarCraft
and an exciting pipeline of yet-to-be announced titles, Vivendi Games'
and Blizzard's management team will join with Activision's strong and
experienced leaders to become an even more powerful force for
innovation in online and offline interactive entertainment across a
wide range of platforms. This transaction also provides a unique
relationship with Universal Music Group - the world's largest music
company - which will benefit Guitar Hero and further extend our
sizable leadership position in music-based games."

Mike Morhaime, President and Chief Executive Officer of Blizzard,
added: "Blizzard's industry-leading PC games business, with a track
record of nine consecutive bestsellers and a global subscriber base of
more than 9.3 million World of Warcraft players, is an exceptional fit
for Activision's highly profitable console games business. From our
interactions with the Activision team, it is clear we have much in
common in terms of our approaches to game development and publishing.
Above all, we are looking forward to continue creating great games for
Blizzard gamers around the world, and we believe this new partnership
will help us to do that even better than before."

Structure & Terms of Transaction

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.

The transaction is expected to be immediately accretive in its first
year post-closing for Activision's stockholders and slightly accretive
for Vivendi's stockholders. Activision Blizzard is targeting pro forma
operating income of $1.1 billion and pro forma earnings per share
(EPS) in excess of $1.20 in calendar year 2009. The transaction is
expected to be at least $0.20 accretive to Activision stockholders in
calendar year 2009.

Governance

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).

Management

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.

Jacobs hopped into a forum thread about the merger over on Grimwell Online to put in his two cents worth.

Folks,

It's going to be a very, very interesting next couple of months here (let alone years).

I will say that so far I'm very impressed with the guys/gals I've been met/been working with at EA. These are not stupid people by any stretch of the imagination. And what has made me quite happy is the fact that, believe it or not, these people actually care about making great games and not just getting it in a box by Q4. Another thing that has almost brought a smile to my face is that they are willing to embrace new IP that is not just "WoW 2007" but IP that can stand on its own two (or three) feet without having to rely on the WoW userbase for its success. The conventional opinion of EA is pretty much that it is just in it to make iterative games but if you listen to what people all the way up to Larry Probst are staying, is that we have to create our own original IP, it is more than just words.

As always, I expect people to believe it when they see it.

Mark

Brian Crecente

Mark Jacobs Talks About the Mythic/EA Merger [Slashdot Games]