Delaware high court clears way for Activision-Vivendi deal
By Tom Hals
DOVER, Delaware (Reuters) - The Delaware Supreme Court swept aside a lower court order on Thursday that had halted Activision Blizzard Inc's $8.2 billion (5.1 billion pounds) deal to buy back its stock from Vivendi SA.
The ruling clears the way for a deal that is part of the French conglomerate's effort to hive off assets and remake itself into a media-focused company. The two companies said in separate statements they expect the deal to close by Tuesday, when Vivendi could have walked away.
Shares of Activision jumped after the Supreme Court ruling and were up nearly 5 percent at $17.05 in afternoon trading. They had been up about 2 percent before the ruling.
Chief Justice Myron Steele announced after an hour of argument that the court's five justices unanimously found the lower court had erred when it blocked the deal because Activision shareholders were not given the chance to vote on it.
The French media and telecoms conglomerate agreed in July to sell most of its stake in the publisher of the blockbuster "Call of Duty" videogame series.
The deal is a key part of Vivendi's drive to streamline its diverse portfolio of investments it built up in a frantic 1990s spending spree. Activision argued the deal would create $1 billion of value for its shareholders.
But last month things hit a snag when an individual Activision shareholder, Douglas Hayes, filed a lawsuit seeking a shareholder vote on the deal.
A week later, judge Travis Laster of the lower Court of Chancery sided with Hayes and took the rare step of halting the transaction on September 18.
The two sides sparred on Thursday over the central question of whether the deal qualified as a merger or "business combination" that would trigger the need for a shareholder vote under Activision's bylaws and charter.
Michael Hanrahan, an attorney for Prickett, Jones & Elliott in Wilmington, Delaware, who represented Hayes, argued that Activision was buying a Vivendi shell company that owned the stock, and therefore it was a merger.
William Savitt, a Wachtell, Lipton, Rosen & Katz attorney who argued for Activision, urged the justices not to read the phrase "business combination" in Activision's charter to mean that a buyback or any large transaction needed shareholder approval.
"It's like saying a green light and red light are the same thing because they are both lights," he said. "There is nothing remotely like a business combination here."
The justices agreed.
"The stock purchase agreement here contested is not a merger, business combination or similar transaction," said Steele. He said the court would follow at an unspecified time with a published opinion.
Hanrahan declined to comment after the ruling.
Under the deal, Activision said it would buy back 429 million shares from Vivendi for $5.83 billion. As part of the terms, a separate investor group led by Activision CEO Bobby Kotick and Co-Chairman Brian Kelly will buy about 172 million Activision shares from Vivendi for $2.34 billion.
The consortium, which will then own 24.9 percent of Activision, includes Davis Advisors, Leonard Green & Partners, Chinese Web portal Tencent, and investment fund Fidelity Investments.
(Reporting by Tom Hals in Wilmington, Delaware; Editing by Gerald E. McCormick, Bernard Orr and Marguerita Choy)
