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Activision shareholder suing to stop Vivendi stock buyback

Saturday, 3rd August 2013 15:39 GMT By Stephany Nunneley

Activision Blizzard shareholder Todd Miller has filed a legal complaint against the company and its current parent, Vivendi, to stop Activision and an investment group headed by CEO Bobby Kotick and Brian Kelly from buying back stock in the firm.

According to Courthouse News, Miller is suing Vivendi, Activision Blizzard and its board of directors for “breach of fiduciary duties, waste of corporate assets and unjust enrichment.”

Miller states that Vivendi – which is $17 billion in debt – is so desperate for cash, it created a conflict of interest for Activision Blizzard’s board of directors- six of which also serve on Vivendi’s board.

“Further, in addition to being beholden to Vivendi, the Vivendi-controlled directors have no incentive to resist Vivendi’s push, as they are all retiring from their roles as Activision directors upon consummation of the transaction,” the complaint stated.

Miller’s complaint also stated that the deal would shortchange shareholders should the company sell 172 million shares to Kotick and Kelly’s investment group at a 10% discount on the closing share price the day before the deal was announced.

The discount gave the firm an “instant windfall of $664 million,” according to the documents, which would give Kotick and Kelly control of the company without providing any benefit to Activision Blizzard or its current shareholders.

“Upon closing of the deal, the insider investor group will become the company’s largest shareholder, holding approximately 172 million shares, or approximately 24.9% of the outstanding common stock,” the complaint stated.

“(T)here was no apparent business purpose in allowing the insider investor group to participate in the discounted stock offering, other than to aggrandize defendants Kotick and Kelly and provide billions of dollars’ worth of Activision stock to the insider investor group at a discounted price.”

On July 26, Activision announced it had arranged to buy back around 429 million shares of company stock from Vivendi, and “certain tax attributes” for $5.83 Billion to effectively sever ties.

In addition, ASAC II LP led by Kotick and Kelly along with Tencent, would secure 172 million shares for $2.34 billion in cash. Kotick and Kelly would also use $100 million of their personal funds.

The two deals are worth $8.17 billion, and account for 602 million shares at $13.60 each. Vivendi would retain 83 million shares, a stake of around 12%. ASAC II LP will own around 24.9%.

Kotick will remain CEO and colleague Kelly would become the sole chairman after the existing Vivendi’s board member exited.

Barring the lawsuit, the deal should be completed by September.

Thanks, GI International.

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11 Comments

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  1. Ireland Michael

    This is going to get messy.

    #1 12 months ago
  2. Dragon246

    I can get his point though. Essentially, Kotick is getting a discount for no reason according to him. His butt is hurting since he didn’t.
    In other words, he also wants some of the moolah.
    I expect Mr.Money to come to the rescue and settle this out of court.

    Btw, if someone could fill on this, the case seems pretty stupid. Its essentially a 3rd person getting butthurt on why a 2nd person gave milk at a discount to the 1st person, with the only common thing being that they all share the same cow.

    #2 12 months ago
  3. zme-ul

    @2
    it’s a whole lot more than that … persons 1 and 2 would own the cow and control who gets the milk
    person 3 would get a whole lot less milk or none at all after the “move”

    #3 12 months ago
  4. Erthazus

    By the time they are fighting with this shit, SOE makes Everquest Next with voxels, emergent AI, etc. etc.

    #4 12 months ago
  5. Dragon246

    @3,
    Actually, person 3 doesn’t get any milk now too. He is just hurt person 2 is selling his milk to person 1 at a discounted fee.
    Mooooo…

    In other words, person 3 owns what he owns, but the controlling share has just shifted hands from one player to another. If someone with a majority, or even a worthwhile stake complained about that, its understandable. However, its not. Vivendi owns the majority, they can do whatever they like with it.
    Unless something in US law says otherwise.

    #5 12 months ago
  6. zme-ul

    @5
    those dudes, Kotick, Kelly and the rest of Vivendi are cheating on Activision’s own money, as a company, solely for those 3 interests

    according to Miller, ActiVision will just “blow away” 664 million USD

    #6 12 months ago
  7. Stephany Nunneley

    The thing is, it’s pretty standard practice to sell employees stock in a company at a discounted rate. A lot of employee stock purchase plans are usually discounted at up to 15%. In this case it was 10% per the company’s policy. Granted it sounds a bit outrageous due to the amount to be gained in the process, but it’s legal. Not taking sides or anything, just adding to the conversation. :p

    #7 12 months ago
  8. zme-ul

    @7
    no one said it’s illegal or anything in that ballpark

    this deal is detrimental to ActiVision and the rest of the people who have stock in the company and aren’t those 3 parties (Vivendi, Kotick, Kelly)
    Miller argues with very good reason, that only those 3 are profiting from the deal – Vivendi because they need the cash, Kotick and Kelly because they want complete control

    #8 12 months ago
  9. Stephany Nunneley

    @8 I know they didn’t. Just explaining that bit to people is all, because not everyone is versed in how stock trading/selling works.

    #9 12 months ago
  10. lookingglass

    Rich people whining… I’ve never cared for it…

    #10 12 months ago
  11. rusty_shackleford

    Kotick and co are trying to shuffle paper around enough times so they end up with the biggest percentage of numbers. where the numbers come from or if they even existed in the first place doesn’t matter, as long as the pieces of paper kotick has at the end say he has 8 billion dollars, right? what a scumbag.

    #11 12 months ago