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.

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Tags: Acquisition, Activision Blizzard, AP7, European Commission, Federal Trade Commission, FTC, Lawsuits, Microsoft, Pension Funds, Sweden, Takeover

Kristin Varela

The State of Hawaii Employees’ Retirement System has hired a new CIO, Kristin Varela, who has been No. 2 at the Public Employees Retirement Association of New Mexico. She succeeds Elizabeth Burton, who served almost four years as the Hawaii plan’s head.

“It’s an honor and an enormous privilege to be appointed to this position,” Varela said in a statement. “I am excited to join such a prestigious team and look forward to serving the hard-working employees of Hawaii.”

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Burton stepped down in June, citing family and personal concerns, and a nationwide search for her replacement ensued. The Hawaii program is slightly larger, at just under $22 billion in assets under management, than the New Mexico plan ($17 billion).

Varela became interim CIO in New Mexico in 2021 after the departure of Dominic Garcia. She held that position until Michael Shackelford took over the top job in August.

Varela holds a B.B.A. in finance from New Mexico Highlands University and last year was nominated for CIO’s Industry Innovation Award for public defined benefit plans below $21 billion. She also was named as one of CIO’s “Forty Under Forty” up-and-comers in 2017 (the award now known as NextGens). At the time, she was focused on real assets.

The Hawaii program touts Varela’s wide-ranging experience, saying in a statement: “Varela brings broad expertise in modeling, market analysis and manager-specific due diligence across various asset classes of public, private and alternative markets. She specializes in risk-based asset allocation, innovative investment solutions and prudent portfolio implementation.”

“She comes highly experienced in the public plan arena and is particularly skilled in the institutional risk and asset classes that are the underpinnings of our successful investment strategy,” said Vince Barfield, chair of the fund’s board, in a statement.

The Hawaii program, which had a funded ratio of 58.3% as of 2021, returned 3.66% for the fiscal year 2022, ending June 30. Hawaii ERS reported three-, five- and seven-year annualized returns of 9.96%, 8.73% and 8.00%, respectively, beating its benchmarks for each period.

Hawaii ERA’s acting CIO, Howard Hodel, intends to retire next year and will stay on to assist the transition.