SOC Investment Group urges Activision shareholders to vote against Xbox deal
It claims the “transaction fails to properly value Activision” and may not be viable
SOC Investment Group has urged fellow Activision Blizzard shareholders to vote against Microsoft’s proposed merger with the Call of Duty publisher.
It was announced in January that Microsoft intends to purchase Activision Blizzard in a $68.7 billion deal—the game industry’s biggest ever by some distance—that would also give the Xbox maker exclusive ownership of franchises including Warcraft, Overwatch, Crash Bandicoot and Guitar Hero.
Activision Blizzard investors are set to vote for or against the proposed takeover in a special meeting of stockholders on April 28. The deal can’t go ahead unless the proposal to adopt the merger agreement is approved by the affirmative vote of the holders of a majority of Activision Blizzard shares.
SOC Investment Group has been highly critical of Activision Blizzard’s response to recent sexual harassment and discrimination lawsuits, and last November it called for the resignation of senior figures including CEO Bobby Kotick, chairman of the board Brian Kelly and lead independent director Robert Morgado.
On Thursday it wrote a letter to fellow shareholders calling on them to reject the proposed merger for two reasons.
“This transaction fails to properly value Activision and its future earnings potential, in significant part because it ignores the role that the sexual harassment crisis—and the Activision board’s incompetent handling of it—has played in delaying product releases and depressing the share price,” SOC argued.
It also said it’s “skeptical that any transaction with Microsoft (or a similar acquirer) would be viable, given the shift in the climate of anti-trust enforcement, as well as evident sources of potential harms to competition stemming from the merger”.
Microsoft has said it hopes to complete the deal in the first half of 2023, subject to closing conditions and the completion of a regulatory review. The US Federal Trade Commission is handling an antitrust review to determine whether the takeover would give Xbox an unfair competitive advantage.
Four US senators recently wrote to the FTC to express their concern over the proposed merger, which they said has already impeded unionisation efforts and “threatens worker-led demands for accountability” over allegations of sexual misconduct and discrimination.
In its letter on Thursday, SOC said: “We do not believe that Activision shareholders should be looking to a transaction to rebuild the value lost by Activision management’s failure to ensure workplace safety and equity and by the board’s failure to respond constructively to the burgeoning crisis.
“But we also observe that at least since last July, Activision employees have courageously demanded that harassment and retaliation at the company end and that they have a decisive role in reshaping the corporate culture going forward.
“We believe that only by constructively engaging with its workforce—the one asset that Activision cannot sell but without which the company cannot operate—can the company begin a genuine turnaround and restore investors’ confidence in its reputation and operations.
“We urge you to join us in rejecting the Microsoft merger proposal and electing a new, competent, and dedicated board of directors at Activision Blizzard’s next annual meeting.”
Related
California’s governor has been accused of meddling in Activision Blizzard lawsuit
The California Department of Fair Employment and Housing (DFEH) sued Activision Blizzard in July 2021 over its failure to handle sexual harassment and discrimination against female employees.
It was revealed on Wednesday that two attorneys previously leading the high-profile lawsuit are no longer on the case following accusations of meddling by California governor Gavin Newsom.
In March, a federal court judge approved Activision Blizzard’s $18 million settlement of a similar sexual harassment lawsuit filed last year by the US Equal Employment Opportunity Commission.
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