Vivendi said Sunday that it plans to acquire a controlling stake in Activision Inc. and combine the company with Vivendi Games in a deal that would create a rival to Electronic Arts Inc. as the world's largest video game publisher.

The combination of Santa Monica-based Activision, whose titles include "Guitar Hero," "Call of Duty" and the "Tony Hawk" series, and Vivendi Games, which publishes "Crash Bandicoot" and owns the online role-playing franchise "World of Warcraft," would create the world's largest pure-play online and console game publisher, the companies said.

Vivendi Games will convert its equity into Activision shares valued at $8.1 billion (5.49 billion), and Vivendi will buy an additional $1.7 billion (1.15 billion) of stock, for a total of $9.8 billion (6.64 billion), giving Vivendi a 52 percent stake in a new company to be called Activision Blizzard. On that basis, Activision and Vivendi valued the combined company at $18.9 billion (12.8 billion).

"This transaction has always stuck out as the way to become the number one most successful video-game publisher," Activision Chief Executive Bobby Kotick said in an interview.

Vivendi's Irvine, California-based Blizzard Entertainment is behind the top multiplayer online role-playing game franchise, "World of Warcraft," which the company says more than 9.3 million subscribers worldwide. Blizzard's Warcraft and Diablo series are two of the top-selling video game lines of all time.

Jean-Bernard Levy, chairman and chief executive officer of Vivendi, pledged the deal "will unlock the value of Blizzard."

Kotick, who will stay on as president and CEO of the new company, said the deal had been in negotiations since January.

Under the agreement, shares of Vivendi Games will be converted into 295.3 million new shares of Activision common stock at a price of $27.50 per share, for a value of $8.1 billion (5.49 billion), the companies said in a statement.

Vivendi, based in Paris, France, also will purchase 62.9 million newly issued shares of Activision common stock at a price of $27.50 per share, or $1.7 billion (1.15 billion), giving Vivendi its 52 percent stake.

Activision Blizzard will continue to operate as a public company traded on the Nasdaq Stock Market under the ticker ATVI.

After the transaction closes, expected in the first half of 2008, Activision Blizzard will launch a $4 billion (2.71 billion) all-cash tender offer to purchase up to 146.5 million Activision Blizzard common shares at $27.50 each. Vivendi also has agreed to acquire an additional $700 million (474.22 million) of newly issued Activision shares, giving Vivendi about a 68 percent stake in Activision Blizzard if the tender offer is fully subscribed.

The offer price is a 24 percent premium to Activision's closing price Friday of $22.15 per share.

Activision Blizzard's board of directors will be comprised of six directors designated by Vivendi, two Activision management directors and three independent directors who currently serve on Activision's board of directors.

Vivendi Games CEO Bruce Hack will serve as vice chairman and chief corporate officer of Activision Blizzard.

The merger will provide Activision Blizzard with the most diversified and broadest portfolio of interactive entertainment assets in the industry, according to the statement.

The companies said the transaction would be accretive to earnings for both companies' shareholders in the first year after the deal closes. The combined company is targeting pro forma operating income of $1.1 billion (750 million) and pro forma earnings per share of more than $1.20 in calendar year 2009.