- New York-based pension funds alleged Activision’s CEO and board rushed a merger deal with Microsoft.
- In a new lawsuit they claim they did so because they wanted to avoid liability for workplace scandals.
- The groups claimed the rushed deal undervalued Activision and hurt shareholder interests.
Santa Monica-based video game company Activision Blizzard faces a new lawsuit from shareholders who say the company sped through its $69 billion merger with Microsoft earlier this year to avoid answering allegations that they turned a blind eye to workplace harassment.
The New York City Employees’ Retirement System, together with other pension funds for the city’s firefighters, police, and teachers, who invest in Activision, filed a complaint with Delaware’s Court of Chancery on April 26 alleging that embattled Activision CEO Bobby Kotick and his board of directors urged Microsoft to quickly close the deal, which resulted in the publisher of “Call of Duty” being undervalued.
Axios was the first to report on the complaint.
Through the complaint, the New York-based groups are trying to force Activision to share records that could prove whether Kotick and the board engaged in any wrongdoing while negotiating the merger deal.
“Because Activision will become a wholly-owned subsidiary of Microsoft after the Merger, the Merger will have the effect of extinguishing these highly valuable derivative claims against Activision’s Board, and specifically against Activision’s Chief Executive Officer Robert Kotick,” the pension funds said in the complaint.
“We disagree with the allegations made in this complaint and look forward to presenting our arguments to the Court,” an Activision spokesperson told Insider.
Allegations of workplace harassment and discrimination at Activision emerged last July with a lawsuit from the state of California.
In July, the state of California sued the video game company, alleging equal pay violations, sex discrimination, and sexual harassment.
The Wall Street Journal followed with a report in November detailing that Kotick had known about these accusations for years, though a spokesperson told the outlet the CEO would not have been aware of all the complaints.
Just days after the Journal’s article, Microsoft started discussing a possible merger with Activision, said the complaint.
The plaintiffs alleged that Kotick was motivated to close the merger quickly to avoid taking responsibility for misconduct at his company.
He was also driven by monetary reward, they claim. The lawsuit alleges that Kotick would bag a bonus of up to $22 million for only making “appropriate progress” towards specific gender-related targets at Activision via the merger.
This meant that Kotick and the board had “conflicts of interest” in negotiating the merger, per the complaint.
The New York-based plaintiffs contested Activision’s claim, saying the figure did not take into account the negative impact of the scandals embroiling the company.
“This deal price represents a paltry 1.16% premium to Activision’s 30-day average stock price” before the date California sued Activision, the complaint said.
“Given Ko tick’s personal responsibility and liability for Activision’s broken workplace, it should have been clear to the Board that he was unfit to negotiate a sale of the Company,” the complaint said. “But it wasn’t.”
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