US analysts react to ActiBlizz merger

US analysts have raised their price targets on Activision in response to news that the company is merging with Vivendi Games.

Stock of Activision and Vivendi have risen 17.4 per cent and 2.7 per cent respectively in morning trading, although the deal has not yet gained regulatory approval.

Commenting upon the deal which would create the world's largest videogame publisher, analyst Colin Sebastian of Lazard Capital Markets noted that the combination was strategically a very good fit, with complimentary product portfolios and business models.

"We expect Activision Blizzard, the new entity, to occupy leadership positions in traditional mass-market video games, as well as the fast-growing and high-margin online gaming segment," he said.

Sebastian noted that Activision could leverage other Vivendi businesses, namely its music publishing, to enhance franchises such as Guitar Hero.

He raised Lazard Capital Markets' price target on Activision from USD 26 to USD 30.

Wedbush Morgan Securities analyst Michael Pachter was similarly upbeat about the merger.

"We are generally positive on the combination, as we think it strengthens Activision's product offering and expands its geographic reach, while allowing Vivendi to further monetize its success with World of Warcraft," he said.

Although lowering his company's rating from "strong buy" to "buy," he raised the price target to USD 30 from USD 27.50.

Activision expects the transaction to close in the first half of calendar 2008, and expects the deal to be immediately accretive to its shareholders.