By Jonathan Stempel (Reuters) -A Delaware judge said former Activision Blizzard officials including Chief Executive Bobby Kotick must face most of a lawsuit alleging they shortchanged shareholders when Microsoft bought the "Call of Duty" game maker for $75.4 billion. Chancellor Kathaleen McCormick of the Delaware Chancery Court said on Thursday the shareholders in the proposed class action can pursue their "core" claim that Kotick and other Activision directors breached their fiduciary duties. She dismissed two claims against Microsoft. Shareholders led by Swedish pension fund Sjunde AP-Fonden accused Kotick of rushing into the merger so he could keep his job and $400 million of change-of-control benefits, and insulate himself from claims he knew about widespread sexual harassment at Activision. They also said the $95 per share takeover price was too low from the outset, and looked worse as Activision's performance improved during the 21-month regulatory approval process for the merger, which closed in October 2023. In an October 7 letter sent after publication of this article, Kotick's defamation counsel disputed claims of widespread harassment at Activision. “Not a single investigation, court finding, verdict, or ruling ever concluded that there was any merit" to the allegations of widespread harassment at Activision, Tom Clare and Nick Brechbill of Clare Locke wrote. In an 83-page decision, McCormick found sufficient allegations that Kotick manipulated the sale process to favor Microsoft, which "offered speed, deal certainty, and–inferably a friendly landing place." She also found it reasonably conceivable that Activision directors put Kotick's interests ahead of those of shareholders, including by allowing a lowball takeover price while harassment concerns were depressing Activision's stock. She dismissed claims that Microsoft aided and abetted the alleged breaches, even if the Redmond, Washington-based company may have "passively stood by" while they occurred. She also dismissed other claims against the Activision defendants. "Litigation on the merits of a trimmed-down version of the plaintiff's complaint can now launch," McCormick wrote. "Game on." A Microsoft spokesperson said that the company believes the remaining claims will be disproved. "This acquisition was fairly negotiated and delivered great value to Activision's shareholders," the spokesperson added. The shareholders' lawyers did not respond to requests for comment. The case is Sjunde AP-Fonden v Activision Blizzard Inc et al, Delaware Chancery Court, No. 2022-1001. (Reporting by Jonathan Stempel in New York; Editing by Bill Berkrot and Diane Craft)
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