Case Detail

Case Summary

Atari: Between a Rock and a Hard Place

Case Number: 5-210-260, Year Published: 2010

HBS Number: KEL539

Request PreviewBuy

Authors: James B. Shein; Judith Crown

Key Concepts

Fiduciary Duties, Board of Directors, Duty of Care, Chief Restructuring Officer, Turnarounds, Turnaround Management, Buyout Offer, Public Company, Governance, International Turnaround, Zone of Insolvency, Mergers, Acquisitions, Takeover

Abstract

Atari, a maker of video games, went through several owners over the years winding up controlled by Infogrames, a French publisher of video games. Infogrames later sold Atari shares in a secondary public offering, eventually reducing the parent’s share to 51.6 percent by September 2005 creating a complicated two-tier ownership structure. Two levels of management made it difficult to get things done. The financial structure was a problem for Infogrames because the French company had to consolidate 100 percent of Atari’s results even though it only owned 51 percent of the company. Atari was generating substantial losses, had defaulted on its debt, and was faced with the possibility of filing for bankruptcy without more working capital.

The independent directors of Atari, when confronted with an unsolicited Infogrames buyout offer, had several options: (1) agree to the $1.68 offer (take the money and run); (2) pursue a white knight (a buyout from another investor of company that would be willing to pay a higher price and invest working capital); (3) file a lawsuit to stop the takeover to buy time or perhaps force Infogrames to increase its offer.

Learning Objectives

  • Communications in a turnaround
  • How planning and executing a communications strategy is as important as other functional actions
  • Dealing with an international ownership base with a U.S. turnaround of a legacy brand with no hard assets
  • Fiduciary duty and governance issues arising from a takeover offer.
  • Number of Pages: 11

    Extended Case Information

    Teaching Areas: Entrepreneurship, Finance, Management

    Teaching Note Available: Yes

    Geographic: London, England; United States

    Industry: Video Games

    Organization Name: Atari

    Organization Department: Board of Directors

    Organization Size: Small

    Decision Maker Position: Principal, Blue Bay Partners

    Decision Maker Gender: Female

    Year of Case: 2008