A lawsuit alleges the Microsoft-Activision “bargain price” deal is made to protect Bobby Kotick

November 15, 2022

The approvals of different competition watchdogs aren’t the only problem for Microsoft with its proposed $69 billion Activision acquisition, as both companies are also being sued by a Swedish state-run pension fund. According to the suit filed by Sjunde AP-Fonden or AP7, one of the Swedish National Pension System reserve funds holding Activision stock, the deal is also being used to protect Activision Blizzard CEO Bobby Kotick. (via Bloomberg Law)

Beyond the companies named in the suit, the 205-page document also lists the names of Kotick and other former and current members of the Activision board for devising a “hastily negotiated” underpriced deal just to keep the company chief in the position until the transaction closes. It adds that the agreement violated Delaware corporate laws when Activision investors were not shown specific serious details of the deal before voting, leading to approval of the transaction in April. The case was also shared in the SEC FORM 10-Q report of Activision Blizzard.

“Among other things, the demand letters and the 220 Complaints seek to investigate purported breaches of fiduciary duty related to the proposed transaction,” the report reads. “Specifically, the demands seek to investigate Mr. Kotick’s role in the proposed transaction with one of the demands alleging that Mr. Kotick’s position at the Company was at risk given workplace issues and he chose to pursue a transaction rather than resign. Such demand further alleges that Mr. Kotick agreed to a price range without authorization from our Board of Directors and that our Board of Directors allowed Mr. Kotick to control the transaction process.”

Furthermore, the complaint says the deal will save Kotick from the liability caused by the “frat house” culture he allowed for years in the company. The suit highlights that it is possible through a variety of ways, including by staying in the corporate position that will continue to give him power, getting a $400 million payout, and ending current shareholder derivative suits.

Microsoft is also a target in the proposed class action made public on the 10th of November in Delaware’s Chancery Court. According to it, Microsoft is responsible for taking advantage of Activision’s “weak and wounded” state, which allowed it to start the merger “at a bargain price.” Additionally, the complaint says the company “had full knowledge of the scandal the merger would help cover up.”

“Microsoft knowingly exploited the harassment scandal and its commercial leverage over Activision precisely to offer Kotick a way to save his own skin,” the suit reads. “It conspired with Kotick and the board to help them evade the personal and professional consequences of that scandal.”

Nonetheless, a Microsoft spokesperson defended the deal to Bloomberg Law by saying, “our proposed acquisition of Activision Blizzard was negotiated lawfully and fairly.” On the other hand, Joe Christinat, Activision’s spokesman, said the transaction benefits the shareholders and stressed how the company implemented a rigorous procedure to make the decision.

“This is a great deal for shareholders,” Christinat told Bloomberg Law. “We garnered 98% approval of votes cast. The board went through a thorough process to decide the right move for employees, shareholders, and players.”

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