Activision is being sued by a shareholder who says the plan to buy its independence from Vivendi is just a power grab by CEO Bobby Kotick.
Activision announced at the end of July a plan to acquire roughly 429 million of its own shares from current parent Vivendi at a cost of more than $5.8 billion. CEO Bobby Kotick said the company "should emerge even stronger [from the buyback] - an independent company with a best-in-class franchise portfolio and the focus and flexibility to drive long-term shareholder value."
But shareholder Todd Miller doesn't agree with that assessment. He's filed a "shareholder derivative complaint" against Activision, its board of directors and Vivendi, alleging "breach of fiduciary duties, waste of corporate assets and unjust enrichment."
An investment group led by Kotick will acquire 172 million shares in a private sale at a ten percent discount on Activision's closing price the day before the deal was announced, making it the largest shareholder in the company and resulting in an "immediate paper windfall of $664 million," according to Miller. But the deal also allows Kotick and Co-Chairman Brian Kelly to "usurp" the company, he claimed, without actually providing any benefit to Activision or its individual shareholders.
"There 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," Miller claims in his suit. He also alleged that at least six of the 11 members of the Activision board have conflicting interests because of their close ties to Vivendi and claimed that they "have no incentive to resist Vivendi's push, as they are all retiring from their roles as Activision directors upon consummation of the transaction."
Miller wants the court to deep-six the deal and force Activision to implement systems that will "prevent future one-sided self-dealing."
Source: Courthouse News Service