BMO Capital Markets Weighs in on Activision Blizzard-Vivendi Buyback Plan

BMO Capital Markets analyst Edward S. Williams says that Activision Blizzard's plan to buy back its shares from Vivendi is a good thing and has reiterated his firm's rating of "outperform." Last night Activision Blizzard announced that – with its own cash on hand and investments from outside sources – it would buy back a total of 601 million shares from Vivendi to the tune of $8.2 billion.

"In our view, this transaction represents the best possible outcome for ATVI shareholders," noted Williams in his report. "We see this transaction as being materially accretive to EPS – potentially boosting EPS by at least 27% and possibly higher, depending on what the eventual interest expense will be. Additionally, with Vivendi no longer controlling the company, we believe we could see a more diverse ownership base and the possible inclusion of ATVI into various indexes."

The firm also raised its earnings per share (EPS) forecast (target price on shares: $21) based on "pre-announced better-than-expected June quarter results," and promised to revisit its estimates for the buyback plan as more details on the actual cost of it become clearer.

"We believe shares of ATVI remain attractively valued and reiterate our Outperform rating," the report concluded.


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