A securities class action settlement was recently agreed upon for a lawsuit involving video game maker ActivisionBlizzard, Inc.
Based in Santa Monica, California, ActivisionBlizzard is a video game maker and the largest publisher of interactive entertainment in the world. The company is responsible for creating and distributing video game franchises including World of Warcraft, Diablo and Call of Duty.
Anthony Pacchia, a shareholder of the video game maker, filed a legal claim after ActivisionBlizzard, along with investor group ASAC II LLP, bought the video game maker's shares from parent company Vivendi SA in 2013 for roughly $8 billion, according to Reuters.
ASAC, led by Bobby Kotick and Brian Kelly, CEO and chairman of the company, bought 172 million shares of the video game maker from Vivendi for around $2.34 billion in cash, or $13.60 per unit of ownership, while the video game maker purchased 429 million shares, as well as some tax attributes, for approximately $5.83 billion, or $13.60 in cash per unit of ownership.
One of the world's largest institutional investors, Davis Advisors, Tencent and Leonard Green & Partners, L.P., were all part of ASAC, which owned nearly 25 percent of ActivisionBlizzard after the transaction. Kotick commented in a statement, lauding the move.
"With the completion of this transaction we open a new chapter in the history of Activision Blizzard," he said. "We expect immediate shareholder benefits in the form of earnings-per-share accretion and strategic and operational independence. Our audiences and our incredibly talented employees around the world will benefit from a focused commitment to the creation of great games. Our shareholders and debt holders will have the benefit of an energized, invested, deeply committed management team focused on generating long-term, superior returns and effectively managing our capital structure."
Securities class action allegations
However, Pacchia alleged that through their role in ASAC, Kotick and Kelly both violated their fiduciary duties, according to Reuters. Instead of allowing the video game maker to repurchase control of its shares, the two executives transferred ownership of ActivisionBlizzard to themselves, he claimed. In addition, he named Vivendi, ASAC and company directors.
Class action settlement terms
To settle the suit, several defendants, as well as numerous insurance companies, will together pay the video game maker $275 million, ActivisionBlizzard announced in a statement. In addition, ASAC's voting rights will be lowered to 19.9 percent from 24.9 percent, and the company's board will take on two unaffiliated directors, according to a letter filed with the court and reported on by Reuters.
In addition, the settlement involves the company paying reasonable and customary costs and fees stemming from plaintiffs' attorneys, the release of all claims brought forth against the defendants and a change in voting rights.
The securities class action settlement agreement, which acknowledges no wrongdoing for either part, is in the best interests of shareholders, the company has asserted. The board of directors also weighed in on the situation in a statement.
"The transaction, structured through the efforts and significant personal investment of Bobby Kotick and Brian Kelly, has contributed to the creation of over $3 billion of value for shareholders. We are pleased to be able to put this matter to rest," they said.
Before being finalized, the class action settlement must receive approval from Delaware Court of Chancery. Appropriate documentation must also be completed.