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Vivendi Raiding Activision's Piggy Bank

A few reports (like this one) have popped up recently talking about the inner financial workings between Activision Blizzard and corporate parent Vivendi (thanks Joao). This article attempts to pull back the curtain to explain to us regular munchkins what magic the financial wizards are performing, explaining that this will saddle the publisher with some of Vivendi's gigantic debt. Here's how this works:

Activision Blizzard is a very successful company, and has just over $4 Billion in its accounts, much of it kept in off-shore accounts. The gaming company has done well for itself by focusing on big titles and not spreading itself out to mobile and free-to-play games. They would need to go into debt in order to meet the special dividend that will be put forth by Vivendi because of US taxes that will come into play when the money changes hands. Current estimates to the amount of debt that A/B will be forced to take on sits at about $1.5 Billion.

Vivendi has accrued over $17 Billion in debt, which was the result of poor business strategies involving telecoms. The original agreement with Activision Blizzard stated that the parent company could not require special dividends from A/B, but that deal expired earlier this month. Vivendi is wasting no time taking everything it can from the game company.

Although Activision CEO Bobby Kotick seems interested in buying the company back from Vivendi, that hasn’t happened. Vivendi has already tried selling off the company, but it didn’t seem there was an interested party who had the cash to buy the world’s largest game publisher. There doesn’t seem to be any reason why the special dividend put forth by the parent company won’t go through.

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34. Re: Vivendi Raiding Activision's Piggy Bank Jul 25, 2013, 03:34 eRe4s3r
 
But it shouldn't be... ^^  
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33. Re: Vivendi Raiding Activision's Piggy Bank Jul 24, 2013, 22:07 Dev
 
ViRGE wrote on Jul 24, 2013, 16:33:
El Pit wrote on Jul 24, 2013, 15:14:
"...$4 Billion in its accounts, much of it kept in off-shore accounts..."

Yeah. Paying taxes is evil. Let the people pay taxes, not us multi-billion companies.
They did pay their taxes; they were taxed at where the item was sold in the first place. No one is dumb enough to pay taxes again, particularly when the entity trying to exert the second tax did nothing to provide for the sale being taxed.
Try reading up on the double irish with dutch sandwich.
https://en.wikipedia.org/wiki/Double_Irish_arrangement
They never paid taxes the first time.
Essentially it uses IP to transfer profits outside of countries that have taxes, and transfer expenses to them instead.
Example:
Google chairman Eric Schmidt says it is Britain's own fault that his company has paid just £10 million in U.K. corporate taxes between 2006 and 2011, even though it had revenues of £11.9 billion in the period from the nation.

Apple does this too:
As it stands, the company paid cash taxes of $3.3 billion around the world on its reported profits of $34.2 billion last year, a tax rate of 9.8 percent. (Apple does not disclose what portion of those payments was in the United States, or what portion is assigned to previous or future years.)

By comparison, Wal-Mart last year paid worldwide cash taxes of $5.9 billion on its booked profits of $24.4 billion, a tax rate of 24 percent, which is about average for non-tech companies.
link
All the big tech companies with lots of IP do this. Its perfectly legal.
 
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32. Re: Vivendi Raiding Activision's Piggy Bank Jul 24, 2013, 20:39 Golwar
 
MattyC wrote on Jul 24, 2013, 12:33:
How in the world did they manage to rack up that much debt while owning Blizzard and Activision? Were they totally unable to get income from them under the prior agreement?

Uhm, investement and expansion is often arranged by debts. Vivendi constantly swaps shares with their partners for all their assets.

The buyout of a 50% stake from an (ex-)partner will easily cost you some billions. A merger will cost you some billions before optimization pays off. Investing in new tech costs billions.

Debts are the standard. And debts won't really impact AB, as long as their business prospects are promising. And they are.

The only surprise here is that Vivendi is so desperate for cash and found no better alternative than losing so much money by paying taxes.
 
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31. Re: Vivendi Raiding Activision's Piggy Bank Jul 24, 2013, 18:49 Cutter
 
Mashiki Amiketo wrote on Jul 24, 2013, 17:38:
Pigeon wrote on Jul 24, 2013, 16:30:
Because normal people and small businesses don't have a fleet of lawyers and accountants to keep the IRS from slapping them with tax dodging charges like big corporations do?
You need a fleet of lawyers and accountants? No not really.

Right, CGAs, CMAs, and Tax Laywers all exist for no reason at all.
 
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"Bye weeks? Bronko Nagurski didn't get no bye weeks, and now he's dead… Well, maybe they're a good thing." - Moe
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30. Re: Vivendi Raiding Activision's Piggy Bank Jul 24, 2013, 17:48 HorrorScope
 
Mashiki Amiketo wrote on Jul 24, 2013, 15:56:
El Pit wrote on Jul 24, 2013, 15:14:

Yeah. Paying taxes is evil. Let the people pay taxes, not us multi-billion companies.

Nothing is stopping you from off-shoring your money either.

There is plenty stopping me, not sure what you are talkin bout.
 
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29. Re: Vivendi Raiding Activision's Piggy Bank Jul 24, 2013, 17:46 RollinThundr
 
ViRGE wrote on Jul 24, 2013, 16:33:
El Pit wrote on Jul 24, 2013, 15:14:
"...$4 Billion in its accounts, much of it kept in off-shore accounts..."

Yeah. Paying taxes is evil. Let the people pay taxes, not us multi-billion companies.
They did pay their taxes; they were taxed at where the item was sold in the first place. No one is dumb enough to pay taxes again, particularly when the entity trying to exert the second tax did nothing to provide for the sale being taxed.

You have to excuse the jealous types who think corporations should be taxed 10 times over so they can give that money to people who refuse to work for a living.
 
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28. Re: Vivendi Raiding Activision's Piggy Bank Jul 24, 2013, 17:38 Mashiki Amiketo
 
Pigeon wrote on Jul 24, 2013, 16:30:
Because normal people and small businesses don't have a fleet of lawyers and accountants to keep the IRS from slapping them with tax dodging charges like big corporations do?
You need a fleet of lawyers and accountants? No not really.
 
--
"For every human problem,
there is a neat, simple solution;
and it is always wrong."
--H.L. Mencken
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27. Re: Vivendi Raiding Activision's Piggy Bank Jul 24, 2013, 16:46 Armengar
 
its a tax write off move. AB have lots of cash but not in the US. To move the cash to the US will involve tax. Taking on debt in the US reduces the tax liability. Thus AB can move cash and write off the debt with the tax liability. That way the parent is more solvent and AB can do something USEFUL with the offshore money.

Having lots of money is pointless if you cannot actually spend it (i.e. use it to pay wages in the US etc)
 
Its not the cough that carries you off but the coffin they carry you off in.
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26. Re: Vivendi Raiding Activision's Piggy Bank Jul 24, 2013, 16:34 Cyanotetyphas
 
DG wrote on Jul 24, 2013, 13:29:
It is not very clear why V taking $3b from AB, who has $4b, will result in AB needing to take on $1.5b debt. A few possibilities occur to me:

Companies do this all the time. It's much better to have a debt and cash on hand then to have nothing. In Queen of Versailles, they talk about how he would even pay for his own house with cash and then take out a mortgage and dump that cash back into the company. It "doubles" your available cash for a nominal fee.

At that kind of level of business its not about doing things effectively or what's cheapest, its about cash flow rates.
 
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Synthetic Error - Entertainment bloggin http://syntheticerror.wordpress.com/
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25. Re: Vivendi Raiding Activision's Piggy Bank Jul 24, 2013, 16:33 ViRGE
 
El Pit wrote on Jul 24, 2013, 15:14:
"...$4 Billion in its accounts, much of it kept in off-shore accounts..."

Yeah. Paying taxes is evil. Let the people pay taxes, not us multi-billion companies.
They did pay their taxes; they were taxed at where the item was sold in the first place. No one is dumb enough to pay taxes again, particularly when the entity trying to exert the second tax did nothing to provide for the sale being taxed.
 
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24. Re: Vivendi Raiding Activision's Piggy Bank Jul 24, 2013, 16:30 Pigeon
 
Mashiki Amiketo wrote on Jul 24, 2013, 15:56:
El Pit wrote on Jul 24, 2013, 15:14:

Yeah. Paying taxes is evil. Let the people pay taxes, not us multi-billion companies.
Nothing is stopping you from off-shoring your money either.

Because normal people and small businesses don't have a fleet of lawyers and accountants to keep the IRS from slapping them with tax dodging charges like big corporations do?
 
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23. Re: Out of the Blue Jul 24, 2013, 16:00 Rigs
 
Ahoy! More Call of Duty's off the port bow!

You know it's going to happen...if they have to make money fast with something 'safe', what do you think they're gonna do? Finance a new IP in the hopes it'll be the next big thing or....yeah...

Oooh, if only I could be there to see Kotick squirm! Hope into one hand and shit into the other and see which one fills up first, motherfucker!


=-Rigs-=

This comment was edited on Jul 24, 2013, 16:22.
 
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'We talked about peace! You didn't want peace. We talked about cooperation! You didn't WANT cooperation. You WANT war! Is that it? You want a war? Well, you've GOT a war!'
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22. Re: Vivendi Raiding Activision's Piggy Bank Jul 24, 2013, 15:56 Mashiki Amiketo
 
El Pit wrote on Jul 24, 2013, 15:14:

Yeah. Paying taxes is evil. Let the people pay taxes, not us multi-billion companies.
Nothing is stopping you from off-shoring your money either.
 
--
"For every human problem,
there is a neat, simple solution;
and it is always wrong."
--H.L. Mencken
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21. Re: Vivendi Raiding Activision's Piggy Bank Jul 24, 2013, 15:14 El Pit
 
"...$4 Billion in its accounts, much of it kept in off-shore accounts..."

Yeah. Paying taxes is evil. Let the people pay taxes, not us multi-billion companies.
 
Consoles? I owned two: a Pong clone and an Atari 2600. And that's it.
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20. Re: Vivendi Raiding Activision's Piggy Bank Jul 24, 2013, 15:08 avianflu
 

17 BILLION of debt. Geez.

 
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19. Re: Vivendi Raiding Activision's Piggy Bank Jul 24, 2013, 14:41 Wallshadows
 
Just in time for Blizzard to sell ugly-ass helms which don't fit most races properly for $15!  
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18. Re: Vivendi Raiding Activision's Piggy Bank Jul 24, 2013, 14:30 Cutter
 
You see what happens, Larry?
 
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"Bye weeks? Bronko Nagurski didn't get no bye weeks, and now he's dead… Well, maybe they're a good thing." - Moe
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17. Re: Vivendi Raiding Activision's Piggy Bank Jul 24, 2013, 14:07 Bard
 
jdreyer wrote on Jul 24, 2013, 13:46:
has just over $4 Billion in its accounts, much of it kept in off-shore accounts

That is so wrong.

Let's not pay our taxes eh?
 
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16. Re: Vivendi Raiding Activision's Piggy Bank Jul 24, 2013, 13:46 jdreyer
 
has just over $4 Billion in its accounts, much of it kept in off-shore accounts

That is so wrong.
 
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"Microsoft is the absent minded parent of PC gaming" - Verno
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15. Re: Vivendi Raiding Activision's Piggy Bank Jul 24, 2013, 13:29 DG
 
NKD wrote on Jul 24, 2013, 09:22:
Don't really have an understanding of all this financial mumbo-jumbo and the article didn't really help much.

I'm guessing this will sink more than a few projects though.
The basic point is that AB will have a lot less cash sitting around to finance projects, and their balance sheet will now not be as very strong as it is currently, which puts it in a relatively precarious position should a major project flop or whatever.


AB is a subsidiary of V. V is the parent/owns AB.

Subsidiaries exist to make profit and/or cash for their parent. In a sense, they are all one "V Group" entity, merely with a legal & accounting structure in place to provide a degree of administrative separation between the companies.

AB has tons of cash, V desperately needs cash, so V Group is shuffling cash from one bank account to the other.

It is not very clear why V taking $3b from AB, who has $4b, will result in AB needing to take on $1.5b debt. A few possibilities occur to me:
- AB needs a ton of cash to finance it's own cash flows.
- For AB to pay the dividend it will need to move the cash in from offshore accounts, which might trigger corporation tax. (In some countries, if you generate profits overseas that profit is only taxed in the domestic country when that profit is remitted to the domestic country.)
- Dividends between companies might be taxable in one/both of the countries involved.
 
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34 Replies. 2 pages. Viewing page 1.
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