Delaware Court Reinforces High Standard to Establish Breach of Duty of Loyalty in a Sale of Control


On July 24, 2009, the Delaware Chancery Court issued a ruling in connection with the July 2008 acquisition by Vivendi S.A. of a majority of the voting stock of Activision, Inc., producer of such well-known video games as Guitar Hero, Call of Duty, and the Tony Hawk series.1

Vivendi combined its subsidiary, Vivendi Games, Inc.,2 with Activision through a series of transactions, including Vivendi?s contribution of Vivendi Games in exchange for newly issued stock of Activision, Vivendi?s purchase of additional newly issued Activision stock for cash, and a post-closing tender offer to the remaining Activision stockholders for up to 50 percent of the remaining Activision stock not owned by Vivendi. A stockholder class action brought by the Wayne County Employees? Retirement System survived the acquisition, challenging the actions of the Activision board of directors in connection with the transactions as breaching its fiduciary duty of loyalty.

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