In the most surprising news of the year, Electronic Arts has been dethroned as the games industry's biggest publisher, ousted by a new company formed following the merger of Activision and Vivendi Games.

The two companies said that the massive power-shifting deal, worth a total of $18.9bn, will create 'the world's largest pure-play online and console game publisher' - a company called Activision Blizzard, which will boast the highest operating margins of any major third-party video game publisher.

Creating the goliath company brings together a raft of Activision's properties, including Guitar Hero, Call of Duty, the Tony Hawk series and a range of licences that includes Spider-Man, X-Men, James Bond and Shrek, with Vivendi's slate of games which includes Blizzard's world-popular World of Warcraft and its Diablo and StarCraft stablemates and the likes of Crash Bandicoot and Spyro.

Key to the move is the access to Blizzard and its MMO, which instantly puts Activision at the centre of the lucrative online gaming business.

Activision Blizzard said it expects to make around 70 per cent of its revenues from owned IP-based franchises, meaning it has "the most diversified and broadest portfolio of interactive entertainment assets in its industry".

Jean-Bernard Levy, chairman of the management board and CEO of Vivendi stated: "This alliance is a major strategic step for Vivendi and is another illustration of our drive to extend our presence in the entertainment sector. By combining Vivendi's games business with Activision, we are creating a worldwide leader in a high-growth industry. We are excited about the opportunities for Activision Blizzard as a broader entertainment software platform."

Robert Kotick, Activision's chairman and CEO added: "This is an outstanding transaction for Activision and our stockholders, as well as a pivotal event in the continuing transformation of the interactive entertainment industry. By combining leaders in mass-market entertainment and subscription-based online games, Activision Blizzard will be the only publisher with leading market positions across all categories of the rapidly growing interactive entertainment software industry and reach the broadest possible audiences."

Activision Blizzard will be directed by a board of key execs from the two companies; current Vivendi Games and Activision bosses Bruce Hack and Robert Kotick are to be appointed as two of eleven directors of the new super-publisher while Rene Penisson, currently a on the board of Vivendi and chairman of Vivendi Games, will serve as chairman of Activision Blizzard.