Activision Blizzard, Inc. v. Hayes
106 A.3d 1029
Del.2013Background
- In 2008 Activision merged with Vivendi Games; Vivendi acquired ~61% of the combined company and the charter was amended (Section 9.1(b)) to require approval by a majority of non-Vivendi stockholders for “any merger, business combination or similar transaction” involving Vivendi when its stake is between 35% and 90%.
- In July 2013 Vivendi agreed to sell 429 million Activision shares and certain NOLs to Activision for ~$5.83 billion by transferring those assets to a newly formed Vivendi subsidiary (Amber), which Activision would acquire; Vivendi would retain ~11.9% post-transaction.
- The SPA also provided for sale of additional shares to ASAC II (affiliated with Activision management); the stock acquired by Activision would be treasury shares, reducing outstanding shares and shifting control to public stockholders.
- Stockholders sued seeking to enjoin the closing, arguing Section 9.1(b) required a vote of public stockholders because the SPA was a “merger, business combination or similar transaction”; the Court of Chancery granted a preliminary injunction.
- On interlocutory appeal, the Delaware Supreme Court reviewed whether the SPA fell within Section 9.1(b), and whether the injunction was proper; the Supreme Court reversed the injunction on the merits and vacated the Court of Chancery’s order.
Issues
| Issue | Hayes' Argument | Activision's Argument | Held |
|---|---|---|---|
| Whether the Court of Chancery could convert TRO to a preliminary injunction without notice | Conversion was procedurally improper | Trial court’s conversion was permissible | Not reached (court resolved merits and did not decide procedural claim) |
| Whether plaintiffs’ delay barred equitable relief (laches) | Delay defeated entitlement to injunctive relief | Laches did not apply; merits control | Not reached (court disposed on merits) |
| Whether the SPA is a “merger, business combination or similar transaction” under Section 9.1(b) | The SPA is a business combination/value-transfer requiring a public stockholder vote | The SPA is a stock repurchase and separation of businesses, not a business combination; Section 9.1(b) does not apply | Held: Section 9.1(b) does not apply; injunction vacated |
Key Cases Cited
- Martin Marietta Materials, Inc. v. Vulcan Materials Co., 56 A.3d 1072 (Del. Ch. 2012) (discusses the expansive/ambiguous potential of “business combination”)
- Kaiser Aluminum Corp. v. Matheson, 681 A.2d 392 (Del. 1996) (standard of review for legal questions)
- Alta Berkeley VI C.V. v. Omneon, Inc., 41 A.3d 381 (Del. 2012) (contract/charter interpretation principles)
- Centaur Partners IV v. National Intergroup, Inc., 582 A.2d 923 (Del. 1990) (contracts may be ambiguous in some factual contexts)
- Morgan Stanley Grp., Inc. v. New England Ins. Co., 225 F.3d 270 (2d Cir. 2000) (treats charter/bylaw amendments as contextual evidence of intent)