Delaware Supreme Court overturns judge's ruling that put Activision-Vivendi deal on hold
Oct 11, 2013 / 7:10 am
DOVER, Del. - The Delaware Supreme Court on Thursday overturned a judge's ruling that delayed the $8.2 billion sale of Vivendi's majority stake in Activision Blizzard Inc. back to the video game maker and an investor group led by CEO Bobby Kotick and co-chairman Brian Kelly.
The ruling clears the way for the deal to proceed before Tuesday's deadline.
Barely an hour after the court heard oral arguments, Chief Justice Myron Steele announced that the court had unanimously determined that the deal does not require the approval of Activision's minority shareholders, as a Court of Chancery judge had ruled last month.
"The stock purchase agreement here contested is not a merger, business combination or similar transaction," Steele said, using disputed language from Activision's corporate charter that was at the heart of the legal fight.
Activision shares closed up 77 cents, or 4.7 per cent, at $17.05 Thursday. The stock price has risen by more than 50 per cent over the past year, reaching a 52-week high of $18.43 in July shortly after the deal was announced.
Vivendi SA, a French media conglomerate that owns 61 per cent of Activision, announced in July that it would sell most of its stake in the video game company, the maker of "World of Warcraft" and "Call of Duty," in an effort to improve Vivendi's balance sheet.
Santa Monica, Calif.-based Activision would buy $5.83 billion worth of its shares at $13.60 apiece, while the investor group led by Kotick and Kelly would purchase another $2.34 billion worth.
The deal would leave Vivendi with a 12 per cent stake in Activision, while the investor group would control 24.9 per cent. The rest of the shares would be traded on the stock market.
The proposed transaction, which carries an Oct. 15 termination date, was derailed after a lone Activision shareholder filed a last-minute, class-action complaint last month, asking for a temporary restraining order and arguing that minority shareholders should be allowed to vote on the deal because it amounted to a business combination or similar transaction involving Vivendi.
"This is a complicated transaction," shareholder attorney Michael Hanrahan argued Thursday. He noted that the stock purchase agreement involves a shell holding company and hundreds of millions of dollars in tax breaks known as net operating loss carry forwards, making it far more complicated than a straight share repurchase by Activision.
But attorneys for Activision and Vivendi argued that the Chancery Court judge erred in ruling that the deal fell within the scope of language in Activision's charter calling for a minority shareholder vote on certain transactions involving the company and Vivendi. They also said the judge was wrong to convert the shareholder's motion for a temporary restraining order into a request for a preliminary injunction, which he then granted.
"The lower court order has stopped this deal in its tracks," said attorney William Savitt, arguing Thursday that the deal was little more than a share repurchase by Activision.
Attorneys for Activision and Vivendi had warned that the deal could fall apart after Tuesday's deadline, even though financing for the transaction remains in place through mid-December.
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