Lawsuit Throws Wrench in Kotick-Led Activision Buyback
“Subject to customary closing conditions.”
You see that phrase in just about every press release announcing a major business deal. It’s legal speak for “not officially completed just yet, but we’re so confident it will be, we’re going to go ahead announce it anyway.” That phrase was in the official press release announcing Activision’s split from Vivendi via an $8 billion buyout in July, but this time around it actually carries weight. Activision Blizzard has confirmed that the mega deal has been halted due to a lawsuit in the Delaware courts.
Here’s how we got here: as Bloomberg reported, Activision-Blizzard shareholder Douglas Hayes filed suit on September 11, asking a Delware court to stop the proposed stock sale. The suit states that the deal would “give control” of the company to CEO Bobby Kotick and Co-Chairman Brian Kelly and “unjustly enrich Kelly, Kotick and the other participants.” According to reports, Hayes is referring to Kotick and Kelly’s investment group gaining control of 25% of Activision-Blizzard while pocketing as much as $644 million in the deal. Hayes wants non-Vivendi shareholders to put the whole thing to a vote. And he just might get it.
As Activision-Blizzard confirmed in a press release, the Delaware Chancery Court, in Hayes v. Activision Blizzard, Inc., has preliminarily enjoined the sale, preventing the closing of the transaction. Now, the deal must be put to a stockholder vote, as Hayes wants, or Activision must find a way to settle.
For its part, Activision stated that it is “committed to the transaction and is exploring the steps it will take to complete the transaction as expeditiously as possible.” A settlement appears the most likely route, but it would also open the door to additional shareholder lawsuits.
We’ll keep you posted. But for now, Activision is still a Vivendi-owned publisher.