Activision officials must face claims over Microsoft takeover, judge rules

A Delaware judge said former Activision Blizzard officials including Chief Executive Bobby Kotick must face most of a lawsuit alleging they shortchanged shareholders when Microsoft bought the "Call of Duty" game maker for $75.4 billion.

Chancellor Kathaleen McCormick of the Delaware Chancery Court said on Thursday the shareholders in the proposed class action can pursue their "core" claim that Kotick and other Activision directors breached their fiduciary duties. She dismissed two claims against Microsoft. Shareholders led by Swedish pension fund Sjunde AP-Fonden accused Kotick of rushing into the merger so he could keep his job and $400 million of change-of-control benefits, and insulate himself from claims he knew about widespread sexual harassment at Activision.

They also said the $95 per share takeover price was too low from the outset, and looked worse as Activision's performance improved during the 21-month regulatory approval process for the merger, which closed in October 2023. In an 83-page decision, McCormick found sufficient allegations that Kotick manipulated the sale process to favor Microsoft, which "offered speed, deal certainty, and--inferably a friendly landing place."

She also found it reasonably conceivable that Activision directors put Kotick's interests ahead of those of shareholders, including by allowing a lowball takeover price while harassment concerns were depressing Activision's stock. She dismissed claims that Microsoft aided and abetted the alleged breaches, even if the Redmond, Washington-based company may have "passively stood by" while they occurred. She also dismissed other claims against the Activision defendants.

"Litigation on the merits of a trimmed-down version of the plaintiff's complaint can now launch," McCormick wrote. "Game on." Lawyers for the individual defendants and Microsoft did not immediately respond to requests for comment on Friday. The shareholders' lawyers did not immediately respond to similar requests.

The case is Sjunde AP-Fonden v Activision Blizzard Inc et al, Delaware Chancery Court, No. 2022-1001.

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