The Delaware Supreme Court has unanimously reversed the chancery court's decision to halt Activision Blizzard, Inc's(1) plan to buy back its own shares from majority owner Vivendi. The court's decision centred on whether the proposed repurchase constituted a "merger, business combination, or similar transaction" under Activision's certificate of incorporation, which provided that any transaction rising to the level of a business combination would require a majority vote of its minority shareholders. The chancery court had issued an injunction against the proposed repurchase, as it was a business combination and such a vote had not taken place. The Delaware Supreme Court reversed the chancery court's decision, allowing the repurchase to proceed.

The Delaware Supreme Court held that although the proposed repurchase reduced Vivendi's stake from 61% to 12%, and involved Activision agreeing to pay Vivendi $5.83 billion, this was insufficient to elevate it to the level of a business combination. According to the court, the proposed repurchase did not "involve any combination or intermingling" of Vivendi's and Activision's businesses, and instead involved the two companies "separating their business connection, leaving Vivendi as a minority stockholder without voting or board control over Activision".

Going forward, the court suggests that the plain language of "business combination or similar transaction" does not necessarily include transactions that involve "a large transfer of funds or other assets", but rather should encompass situations where one company ends up "having a greater connection with and/or control" over another's business.

For further information on this topic please contact Howard Glazer or Jason Freedman at Ropes & Gray LLP's San Francisco by telephone (+1 415 315 6300), fax (+1 415 315 6350) or email (howard.glazer@ropesgray.com or jason.freedman@ropesgray.com). Alternatively, contact Jeffery Koh at Ropes & Gray LLP's Chicago office by telephone (1 312 845 1200), fax (1 312 845 5500) or email (jeffery.koh@ropesgray.com). The Ropes & Gray LLP website can be accessed at www.ropesgray.com.

Endnotes

(1) Activision Blizzard, Inc v Hayes, 497, 2013 (Del November 15 2013).