Swedish Pension Fund AP7 Sues Microsoft, Activision Over Takeover Deal

Swedish pension fund AP7 said it is suing Microsoft and Activision Blizzard, Inc., concerning the software giant’s proposed $68.7 billion takeover of the video game developer.

The pension fund alleges the process, the bid and the terms of the acquisition were not done correctly and “disadvantaged Activision’s shareholders, which include AP7 and our savers,” the pension fund said in a statement.

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In January, Microsoft announced plans to acquire Activision Blizzard for $95 per share in cash. The company said the deal would make it the world’s third-largest gaming company by revenue. However, AP7 said that in 2021, Activision and its CEO, Bobby Kotick, became involved in a sexual harassment case that spurred U.S. authorities to launch investigations into the matter, as well as several private lawsuits.

“It had a negative effect on the share price of Activision,” the pension fund said, adding that employees, investors and the public were calling for Kotick’s resignation because he was aware of sexual harassment allegations and did not report them. “Instead, the CEO negotiated the merger with Microsoft, which included a provision that allowed him to continue as CEO while the merger was pending review by U.S. and international regulators.”

The pension fund alleges that this led to an undervaluation of Activision and that it unfairly protected the CEO and other board members involved, “at the expense of Activision’s shareholders.”

AP7 said it is looking either for a judgment or settlement, as the litigation was initiated to “compensate Activision shareholders for the harm they suffered as a result of the flawed merger process and unfairly low bid price.”

However, the lawsuit may end up being moot, as the proposed acquisition still needs to be approved by regulators, who have expressed concerns about the deal. Last month, the European Commission opened an investigation to assess the proposed acquisition under EU merger regulations. The commission said it was concerned the transaction would hurt competition.

“The transaction may significantly reduce competition on the markets for the distribution of console and PC video games, including multi-game subscription services and/or cloud game streaming services, and for PC operating systems,” the commission said in a statement.

“Our proposed acquisition of Activision Blizzard was negotiated lawfully and fairly,” a Microsoft spokesperson said via email. Activision Blizzard did not respond to requests for comment.

The U.S. Federal Trade Commission Thursday filed an antitrust lawsuit seeking to block the merger.