Securities Suit Filed Over Microsoft’s Proposed Purchase of Activision Blizzard

A disgruntled shareholder filed suit on Thursday against Activision Blizzard Inc. in connection with the proposed $68.7 billion sale to Microsoft Corporation. The Los Angeles, California, complaint says that Blizzard and its leaders failed to disclose material aspects of the deal in their Securities and Exchange Commission (SEC) filings, leaving shareholders uninformed ahead of the acquisition vote.

The suit explains that terms of the deal were memorialized mid-January. Thereunder, Microsoft proposed to buy Blizzard for $95 per share in cash. The preliminary proxy statement at the heart of the instant complaint was filed a month later.

In particular, the shareholder says that the proxy statement “describes an insufficient process in which the Activision Board failed to create an independent committee composed of disinterested directors to run the sale.” The filing points to potential conflicts of interest, citing the board members’ ability to obtain “significant and immediate benefits” upon consummation of the deal. Executives’ expected compensation and “golden parachute” payouts in the event of termination are notoriously absent from the proxy statement, the shareholder claims. 

The lawsuit also takes aim at the financial projections and analyses prepared by Blizzard’s financial advisor, Allen & Company LLC. For example, the proxy statement allegedly reveals that the third-party reviewed “certain internal financial forecasts, estimates and other financial and operating data relating to Activision Blizzard.”

The complaint argues that those projections should have been disclosed, but were not. For legal backing, the shareholder cites case law adjudging “management’s inside view of the company’s prospects” to be invaluable yet unobtainable to investors unless specifically disclosed.

The lawsuit states two counts for relief under the Securities and Exchange Act, one against all defendants, and the other against the ten individual defendants for allowing the filing of the allegedly incomplete and inaccurate proxy statement.

The shareholder is represented by Brodsky & Smith.