Santa Monica-based Activision Inc., is about to merge with French entertainment company Vivendi in an $18.9 billion deal.

The deal will combine Activision with its Games unit and then rename the new division as “Activision Blizzard.”

Vivendi is to put $1.8 billion (1.2 billion euros) into the new company and will retain a majority 52-percent stake initially, which will gradually increase to 68 percent.

Analysts have praised the creation of Activision Blizzard, describing the move as “unprecedented” in the video games industry.

The new company will continue to be traded on the NASDAQ under the "ATVI" ticker symbol.

The deal calls for shares of Vivendi Games, seller of titles like World of Warcraft and Crash Bandicoot to be converted into 295 million new shares of Activision stock at a price of $27.50 a share, according to a joint press release. Vivendi will also buy 63 million shares of Activision stock at $27.50 for a 52% stake in the new company.

After the deal closes sometime in the first half of next year, Activision Blizzard will pay up to $4 billion in cash for as many as 145.6 million shares of Activision Blizzard stock at $27.50 a share. The terms represent a 24% premium over the Friday closing price of $22.15.

According to a release, current Activision Chairman and Chief Executive Officer Robert Kotick will be president and CEO of the new company. Current CEO of Vivendi Games Bruce Hack will serve as vice-chairman and chief corporate officer, accountable for leading the merger integration and the finance, human resources and legal functions.

The merger was driven by a need for size in the industry, which is required to sell games in local markets across the world and finance costly research and development.

Activision was set up in 1979 and has games such as "Call of Duty," the Tony Hawk skateboard series, "Guitar Hero," "Spider-Man," "James Bond," "Shrek," "X-Men" and "Transformers."

Vivendi Games, which has 4,000 employees, is already an international market leader through its "World of Warcraft," an online multi-player subscription game, developed by its Blizzard Entertainment subsidiary, which has an estimated 9.3 million players.

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Narayan Bhat is a contributing editor for TMCnet. To see more of his articles, please visit his columnist page.