US Court Halts $8.2 Billion Activision Deal with Vivendi

Thursday, 19 Sep 2013 09:11 AM

 

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A U.S. court has halted the closing of Vivendi's $8.2 billion deal to sell most of its stake in Activision Blizzard Inc. back to the U.S. video games publisher, delaying its completion.

Vivendi said in July it had agreed to sell most of its stake in the publisher of the blockbuster "Call of Duty" video game franchise for $8.2 billion, paving the way for a broader split of the French conglomerate's media and telecoms assets.

"Vivendi and Activision Blizzard remain committed to a swift conclusion of the transaction and are considering all options with their lawyers in light of the Court's order," the companies said in a statement.

The Delaware Chancery court decision has temporarily put a hold on the closing after Activision shareholder Douglas Hayes filed a lawsuit arguing the companies breached their legal duty to investors by not submitting the deal to a shareholder vote.

Activision and Vivendi could still appeal the preliminary court decision, and if they prevailed the deal could close with minimal delay. Alternately, they would have to organize a shareholder vote, which would take longer, analysts said.

The two sides had been aiming to finalize the operation by the end of September.
UBS analyst Eric J. Sheridan wrote in a research note that the "transformational" deal was likely to be delayed but not derailed completely.

"We expect that the parties could explore a dual track approach of appealing the decision, which if successful, would likely result in a faster resolution than a vote, and seeking a non-Vivendi shareholder vote," said Sheridan.

"In our view, we expect shareholders would approve the transaction in such a scenario given the deal's accretion for shareholders."

The proceeds of the Activision deal are essential to Vivendi's plan — now being evaluated by executives and the board — to split itself into separate media and telecom businesses.

Under the deal, Activision said it would buy back 429 million shares from Vivendi for $5.83 billion. As part of the terms, an investor group led by its chief executive Bobby Kotick and co-chairman Brian Kelly will separately purchase about 172 million Activision shares from Vivendi for $2.34 billion.

The consortium, which will own 24.9 percent of Activision, includes Davis Advisors, Leonard Green & Partners, Chinese web portal Tencent, and investment fund Fidelity Investments.

The shareholder, Hayes, who has sued Activision, Vivendi and the investor group, claimed that the deal should not be completed as it was not subject to a majority vote of Activision's stockholders, excluding majority owner Vivendi and its affiliates.

The court granted a temporary injunction on the closure of the deal, unless its order is modified on appeal or the transaction is approved by a vote by Activision's shareholders.

Vivendi shares were down 1 percent on Thursday at 1147 GMT, while the French blue-chip index rose 1 percent.

© 2014 Thomson/Reuters. All rights reserved.

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