SAN FRANCISCO/PARIS A U.S. court has taken the rare step of halting Vivendi SA's $8.2 billion deal to sell most of its stake in Activision Blizzard Inc back to the U.S. videogame publisher, but the move is unlikely to kill the transaction, according to analysts and legal experts.
The Delaware Chancery court decision put a temporary hold on the deal's closing, after Activision investor Douglas Hayes filed a lawsuit arguing the companies breached their legal duty by failing to submit the deal to a shareholder vote.
The surprise ruling, which emerged after Wednesday's market close, delays a deal regarded as pivotal for Vivendi as it streamlines a diverse portfolio built up in a frantic 1990s spending spree.
Vivendi said in July it had agreed to sell most of its stake in the publisher of the blockbuster "Call of Duty" videogame franchise for $8.2 billion, paving the way for a broader split of the French conglomerate's media and telecoms assets.
"It is exceedingly rare for a court to enjoin a corporate transaction or shareholder vote - not never, but seldom," said Boris Feldman, a lawyer at Wilson, Sonsini, Goodrich & Rosati. Feldman's firm is not involved in the case.
Activision and Vivendi could now appeal the preliminary court decision, and if they prevailed the deal could close relatively quickly. Feldman said the Delaware courts are "extremely fast," and that the Delaware Supreme Court could be expected to rule "in a matter of weeks, not months."
Another option would be for Activision to arrange a shareholder vote, which would take longer, analysts said.
Both sides had aimed to finalize the transaction by the end of this month.
Wall Street was relatively unfazed by the court ruling, with Activision's shares down 0.6 percent at $17.06 on the Nasdaq on Thursday afternoon. Activision shares were still well above the $13.60 level at which Vivendi intends to sell its Activision stock back to the company, meaning that buyers would obtain stock at a steep discount.
"We expect that the parties could explore a dual track approach of appealing the decision, which if successful, would likely result in a faster resolution than a vote, and seeking a non-Vivendi shareholder vote," UBS analyst Eric Sheridan wrote in a research note.
"We expect shareholders would approve the transaction in such a scenario given the deal's accretion for shareholders."
'CONSIDERING ALL OPTIONS'
Under the deal, Activision said it would buy back 429 million shares from Vivendi for $5.83 billion. As part of the terms, an investor group led by Activision CEO Bobby Kotick and Co-Chairman Brian Kelly will separately purchase about 172 million Activision shares from Vivendi for $2.34 billion.
The consortium, which will own 24.9 percent of Activision, includes Davis Advisors, Leonard Green & Partners, Chinese Web portal Tencent, and investment fund Fidelity Investments.
The shareholder, Hayes, who has sued Activision, Vivendi and the investor group, claimed that the deal should not be completed as it was not subject to a majority vote of Activision's stockholders excluding majority owner Vivendi and its affiliates.
The court granted a temporary injunction on the closure of the deal, unless its order is modified on appeal or the transaction is approved by a vote by Activision's shareholders.
Vivendi shares closed 0.4 percent lower at 17.38 euros in Paris trading, while the French blue-chip index rose about 1 percent.
"Vivendi and Activision Blizzard remain committed to a swift conclusion of the transaction and are considering all options with their lawyers in light of the Court's order," the companies said in a statement.