Activision shareholder suing to stop Vivendi stock buyback

Saturday, 3 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.