Court Strikes Injunction on Vivendi's Activision Exit

DOVER, Del.--Delaware's highest court Thursday struck down an injunction that has been holding up Vivendi SA's (VIV.FR) exit from its control stake in videogame maker Activision Blizzard Inc. (ATVI).

"There is no reasonable possibility for success on the merits" of a shareholder attack on the deal, Chief Justice Myron Steele said, speaking for a unanimous five-person panel at the conclusion of a hearing before the Delaware Supreme Court.

The ruling is a victory for Vivendi and Activision, which said an injunction issued last month by Delaware's Court of Chancery endangered an $8.2 billion transaction.

"We're absolutely delighted and look forward to completing a deal very shortly," a Vivendi spokesman said.

With terms of the arrangement that will allow Vivendi to return Activision to the control of public shareholders set to expire next week, the companies scrambled to get before the Delaware Supreme Court to upset the injunction.

"The lower court's order has stopped this deal in its tracks," said Wachtell, Lipton, Rosen & Katz's William Savitt, the attorney who spoke for Vivendi and Activision at Thursday's hearing.

Welcomed by the market, the transaction added about $1 billion to Activision's value shortly after it was announced. Those gains, and the prospects that Activision's public shareholders would be able to take charge of the company, were put at risk by continued uncertainty about the deal, Vivendi and Activision argued.

Shareholders sued on the grounds that they're entitled to vote before the transaction goes through.

"The market says it's a good deal, they say. But the market doesn't get to decide," said Prickett, Jones & Elliott's Michael Hanrahan, arguing for the shareholders.

Vice Chancellor Travis Laster of the Court of Chancery sided with the shareholders and ordered Vivendi and Activision to hold up the transaction until shareholders are polled. He relied on corporate provisions that said shareholders would get to vote on business combinations.

Mr. Savitt said the transaction is the opposite of a business combination. "To the contrary, the transaction marks Vivendi's exit from Activision as its controlling shareholder," he said.

Chief Justice Steele, speaking for the court, agreed. "The stock purchase agreement here contested is not a merger, business combination or similar transaction," he said.

The planned sale of the Activision stake--down to about 12% initially--is part of Vivendi's strategy to reshape itself as a smaller media company. It plans to use the proceeds of the sale, along with another potential deal, to sell its stake in African phone operator Maroc Telecom (IAM.CL) to pay down debt, allowing it to spin off French phone operator SFR. -Sam Schechner contributed to this article.

Write to Peg Brickley at [e-mail].

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