Activision officials must face claims over Microsoft takeover, judge rules
(Reuters) -Former Activision Blizzard officials, including Chief Executive Bobby Kotick, will face most of the lawsuits alleging they shortchanged shareholders when Microsoft acquired the “Call of Duty” game maker for $75.4 billion, a Delaware judge said.
Chancellor Kathaleen McCormick of the Delaware Chancery Court said Thursday that shareholders in the proposed class action could pursue their “essential” allegations that Kotick and other Activision executives breached their fiduciary duties. He denied two allegations against Microsoft.
Shareholders, led by Swedish pension fund Sjunde AP-Fonden, accused Kotick of rushing into the merger so he could keep his job and $400 million in change-of-control benefits and insulate himself from allegations he knew about widespread sexual harassment at Activision.
They also said the $95-per-share purchase price was too low from the start and looked even worse as Activision’s performance improved during the 21-month regulatory approval process for the merger, which is completed in October 2023.
In a letter sent on October 7 after this article was published, Kotick’s defamation attorney disputed allegations of widespread harassment at Activision.
Clare Locke’s Tom Clare and Nick Brechbill wrote that there is not a single investigation, court finding, verdict, or decision that concludes that allegations of widespread harassment at Activision have merit.
In an 83-page decision, McCormick found sufficient allegations that Kotick manipulated the sales process in Microsoft’s favor; this Microsoft “offered speed, deal certainty, and — as a result — a friendly landing site.”
He also thought it was reasonable for Activision executives to put Kotick’s interests ahead of shareholders’ interests; this included allowing a low purchase price as harassment concerns weighed on Activision shares.
He denied allegations that Microsoft aided and abetted the alleged breaches, even though the Redmond, Washington-based company “passively stood by” while the breaches occurred. He also denied other allegations against Activision defendants.
“Trial on the merits of an abbreviated version of Plaintiff’s complaint may now be commenced,” McCormick wrote. “The game begins.”
A Microsoft spokesperson said the company believes the remaining allegations will be debunked. “This acquisition was negotiated fairly and delivered significant value to Activision shareholders,” the spokesperson added.
Lawyers for shareholders did not respond to requests for comment.
The case is Sjunde AP-Fonden v. Activision Blizzard Inc et al., Delaware Chancery Court, No. It is 2022-1001.
(Reporting by Jonathan Stempel in New York; Editing by Bill Berkrot and Diane Craft)
