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According to a Friday report from The Verge, Microsoft Corp (NASDAQ: MSFT) is edging closer to finalizing its proposed $68.7 billion acquisition of Activision Blizzard, with an expected announcement set for next week. The US-based tech giant has earmarked October 13 as the potential closing date for the deal.
The long-awaited acquisition, which has been in the works for over 20 months, is subject to approval from the UK’s Competition and Markets Authority (CMA), the regulatory body responsible for strengthening business competition in the nation.
Microsoft initially announced its plans to acquire Activision Blizzard, along with all of its studios and franchises, including the Call of Duty game, in January last year.
The fintech giant agreed to pay $95 per share to purchase the video game company, totaling approximately $68.7 billion, marking its highest acquisition since its inception. However, the deal was contingent on approval from the CMA.
The proposed acquisition faced several setbacks from regulators across the United States and Europe. Earlier this year, the UK business competition regulator initially blocked the company’s plans, citing concerns related to cloud computing.
To address these concerns, the tech giant restructured the deal, transferring cloud gaming rights for both current and future Activision Blizzard games to Ubisoft. This adjustment secured preliminary approval from the CMA in September.
Sources familiar with the matter disclosed that, as of today, the CMA’s deadline for gathering opinions on granting consent for the deal expires, and a final decision from the regulator is expected to be reached next week.
If all goes as planned, Microsoft will successfully close the deal, ending a protracted process marked by regulatory approvals and disputes across Europe and the United States.
The two companies had earlier agreed to extend the deal deadline until October 18. However, with CMA approval underway, the deal may not reach a deadline before closing.
The UK is not the only jurisdiction where Microsoft faced regulatory scrutiny. The European Union approved the acquisition in May, with the company making significant cloud-related concessions.
The approval came after the Federal Trade Commission (FTC) in the United States initially filed a lawsuit to block the Activision Blizzard acquisition last year. The agency also filed to temporarily restrain the company from the deal in June.
Despite their efforts, the FTC failed to secure a preliminary injunction against the company during a strenuous five-day hearing in July, known as FTC vs Microsoft.
While the outcome of that hearing is currently under appeal with the Ninth Circuit Court of Appeals, the FTC is also planning to resume its administrative case against Microsoft’s proposed acquisition.
The administrative case will commence 21 days after the Ninth Circuit rules on the FTC’s appeal, and the hearing will be held virtually. Should Microsoft’s deal close on schedule, the FTC faces a formidable challenge in attempting to undo the acquisition.
Meanwhile, in a recent interview with GameBeat, Activision President Rob Kostich expressed his optimistic outlook for the Call of Duty franchise as it approaches integration into the Microsoft family.
Kostich believes Call of Duty is poised to benefit significantly from Microsoft’s extensive resources and technology offerings.
“Being able to tap into Microsoft’s technology and suite of tools would benefit our teams to create an even greater, more immersive experience for our players. Ultimately, it’s about bringing our development team’s creative vision to life in this hyper-competitive environment,” Kostich stated.
The Activision boss sees a wealth of opportunities on the horizon for Activision Blizzard, describing the acquisition as an “extraordinary opportunity” for the gaming giant.
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In response to the initial rejection, Microsoft has introduced a new proposal that both companies have mutually accepted. The terms of this agreement have been adjusted to align with the stipulations of the UK Competition and Markets Authority.
Microsoft has submitted a revised agreement to the UK Competition and Markets Authority (CMA) for the acquisition of Activision Blizzard after the initial proposal faced rejection.
In January 2022, Microsoft put forth a proposal to acquire Activision Blizzard for $69 billion. However, this announcement triggered regulatory moves from authorities in the United States, the United Kingdom, and Europe, leading to a more complex approval process. Particularly, the UK Competition and Markets Authority declined Microsoft’s initial takeover proposal, expressing concerns about potential consequences for competitors.
In response to the initial rejection, Microsoft has introduced a new proposal that both companies have mutually accepted. The terms of this agreement have been adjusted to align with the stipulations of the United Kingdom regulatory body.
The CMA is now set to initiate an inquiry into the revised agreement, with the final decision to accept or reject the proposal slated for October 18. However, Brad Smith, Microsoft’s Vice Chairman and President, anticipates the possibility of concluding the process prior to the 90-day extension. Furthermore, he voiced his confidence in the positive impact that the new proposal could have on gamers and the gaming industry, stating:
“We are convinced that this development holds promise for players, the evolution of the cloud game streaming market, and the overall expansion of our industry. As we continue to navigate the review process with the CMA, our commitment remains steadfast in delivering the remarkable advantages of this acquisition to players, developers, and the industry at large. Today’s development signifies a significant stride towards delivering the joy of gaming to enthusiasts worldwide.”
The revised agreement grants Microsoft a more limited set of privileges. Among the changes is the transfer of cloud streaming rights for all existing and upcoming Activision Blizzard games over the next 15 years to Ubisoft Entertainment. This move enables Ubisoft to explore diverse business models and pricing strategies for its games. In return for these rights, Ubisoft will compensate Microsoft with a one-time payment and other benefits over time.
With this restructured agreement, Microsoft will not have the exclusive right to release Activision Blizzard games on its own Xbox cloud gaming service. Consequently, these games will not be confined to the Microsoft ecosystem and can also be accessible on other gaming platforms.
Furthermore, Microsoft won’t have sole control over how other gaming services can use Activision Blizzard games. This way, the Redmond tech giant won’t have the power to dictate the terms and conditions for licensing the games to its competitors.
The new agreement is intended to promote fair competition and make sure that Microsoft does not have the power to restrict the availability of these games to its own service or control other gaming platforms using its games.
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The judge ruled that the FTC lacked to show how the acquisition of Activision Blizzard by Microsoft will lessen competition in the gaming industry.
Shares of Activision Blizzard Inc (NASDAQ: ATVI) closed Tuesday trading at $90.99, up 10 percent from the day’s opening price. Similarly, it was bullish for the $2.47 trillion valued Microsoft Corporation (NASDAQ: MSFT) after federal judge Jacqueline Scott Corley in San Francisco denied the Federal Trade Commission’s (FTC) motion for a preliminary injunction in the Activision Blizzard acquisition deal. Notably, Judge Corley argued that the FTC lacked to show how the $68.7 billion acquisition of Activision Blizzard by Microsoft will lessen competition in the gaming industry.
As a result, the closure of the acquisition deal continues and is scheduled to complete by July 18 if all goes to plan. The move was previously in limbo after both the US and UK regulators closed the acquisition deal. With the FTC out of the picture, Microsoft can now focus on resolving its difference with the Competition and Markets Authority (CMA) in the United Kingdom.
“We’re optimistic that today’s ruling signals a path to full regulatory approval elsewhere around the globe, and we stand ready to work with UK regulators to address any remaining concerns so our merger can quickly close,” Activision Blizzard CEO Bobby Kotick noted in a memo on Tuesday.
As a result, Activision Blizzard’s merger with Microsoft has been given a green light in 39 countries having proved not to hurt the competition in the industry. Moreover, Kotick told employees that the merger is for the good of the industry and will continue working until full regulatory approval is obtained.
According to the FTC, the acquisition of Activision Blizzard by Microsoft is a huge threat to the cloud gaming, subscription services, and consoles industry. As a result, the FTC vowed to keep fighting the termination of the merger deal in a bid to preserve competition and protect consumers. Furthermore, the FTC believes Microsoft will make Activision Blizzard part of its exclusive games and prevent Sony’s PlayStation or Nintendo’s Switch from accessing the games. However, Microsoft has denied the allegations and noted that it intends to make Activision Blizzard games more widely accessible to the global gaming community.
Trading around $90.80 during the after-hours, Activision Blizzard shares are valued at approximately $65 billion. It means that they have risen approximately 19 percent YTD. Irrespective of Microsoft’s merger deal, Activision Blizzard has a bright future in the cloud gaming industry. Moreover, 22 Wall Street analysts issued an average recommendation of Overweight and a price target of $90.95.
Meanwhile, Microsoft shares have risen approximately 39 percent YTD to trade around $332 during the after-hours trading session on Tuesday.
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Microsoft wants to acquire the video game holding company valued at approximately $70 billion but the FTC is against the move for an anti-competition stance.
The Federal Trade Commission (FTC) filed for a temporary restraining order – in the United States District Court of Northern District of California, San Francisco Division – to seek a preliminary injunction for the acquisition of Activision Blizzard Inc (NASDAQ: ATVI) by tech giant Microsoft Corporation (NASDAQ: MSFT) for a whopping $70 billion. According to court documents filed on Monday, June 12, the FTC has been investigating the acquisition of the video game company on anti-competition matters. Moreover, the purchase of Activision Blizzard by Microsoft would make it the largest acquisition in the history of the video gaming industry.
Notably, the FTC initiated an administrative proceeding on December 8, 2022, to determine whether the proposed acquisition violates any of the anti-competition acts.
Similarly, the UK and Europe’s anti-competition agencies had issued similar warnings on the acquisition of the video gaming company by Microsoft. Moreover, Activision Blizzard publishes gaming products that are used by several consoles, PCs, and on mobile in a similar way that Microsoft does with the Xbox among other gaming products.
“On April 26, 2023, the United Kingdom Competition and Markets Authority (UK CMA ) issued a report finding that the Proposed Acquisition may be expected to result in a substantial lessening of competition in cloud gaming services in the United Kingdom,” the court filings noted.
According to Microsoft President Brad Smith, the move by the FTC and UK CMA is welcomed in order to accelerate the processes of finding Justice.
“We believe accelerating the legal process in the US will ultimately bring more choice and competition to the market,” Smith noted.
Following the announcement, Microsoft shares closed Monday trading at $331.85, up 1.5 percent from the day’s opening price. The MSFT shares continued with the bullish outlook in the after-hours with about a 0.65 percent gain. The ATVI shares, on the other hand, traded sideways on Monday after closing the day trading at around $79.77 and hovered at the same level in the after-hours. YTD, Microsoft shares have gained 38 percent while ATVI has added approximately 4.21 percent.
The Biden administration has significantly ramped up its effort on the enforcement of antitrust laws. Back in 2021, Biden signed a punitive executive order encouraging government agencies to enforce antitrust laws. As a result, Microsoft may be compelled to continue with its video gaming projects without Activision Blizzard.
The growth of Web3-focused games has significantly pushed traditional gaming companies to move in a similar direction. Meanwhile, it is the cloud computing technology that is set to make a difference in the growth of the video gaming industry in the coming years.
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European Commission stated that Microsoft is offering remedies to allay competition concerns allowing consumers to stream the titles on any cloud computing platform of their choice.
On Monday, May 15, the regulators of the European Union approved the long-awaited $69 billion acquisition of gaming giant Activision Blizzard by Microsoft. The European Commission, which is the executive arm of the EU stated that Microsoft has offered remedies in the area of cloud gaming which has been currently marred with antitrust concerns. These remedies will allow users to stream Activision games that they purchase on any cloud streaming platform.
This is a big win for tech giant Microsoft after the top competition authority in the UK blocked the deal last month. Regulators worldwide have shared concerns about whether Microsoft’s acquisition of Activision could distort competition in the cloud gaming and console market.
Some regulators also asked whether Microsoft might take Activision games and keep them exclusively on its own platform. As we know, Activision Blizzard is behind some of the biggest console and PC games in the world. This includes popular names such as World of Warcraft and the Call of Duty Franchise.
The UK Competition and Markets Authority (CMA) said last month that the deal would reduce competition in the nascent cloud gaming market. Furthermore, it also noted that Microsoft would find it. commercially beneficial to put all Activision games exclusive to its platform. However, the CMA stated that the acquisition would not reduce competition in the console market.
Along with regulators, Microsoft has also faced opposition from rivals such as PlayStation games console maker Sony. But in February, Microsoft President Brad Smith met with EU officials wherein it said that they would bring the Xbox PC games to Nvidia’s cloud gaming service. Nvidia had also expressed opposition to the acquisition deal. Furthermore, Microsoft had also signed a 10-year deal with Nintendo to bring Call of Duty to its platform.
Currently, Microsoft’s Xbox is much behind other competitors like Sony’s PlayStation 5 as well as the Nintendo Switch. However, the US technology giant is putting a major focus on the so-called cloud gaming market. A large part of the EU’s recent investigation centers around cloud gaming.
Cloud gaming allows users to stream games directly from servers which removes the need for expensive dedicated hardware such as consoles. Users can play this game on all existing devices such as smartphones, TVs, and laptops.
However, for players to succeed in the cloud computing sphere, they will have to offer a large catalog of games wherein users can access them immediately from a subscription service. Microsoft looks to capture this market with the acquisition of Activision Blizzard.
The European Commission stated that Microsoft is offering remedies to allay competition concerns. Consumers who have bought Activision Games will be able to stream the titles on any cloud computing platform of their choice.
Additionally, Microsoft will also be able to offer royalty-free licenses to cloud gaming platforms in order to stream Activision games.
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Activision realized higher-than-expected net bookings of $3.57 billion for Q4 2022 as it hopes to conclude its Microsoft deal in June.
Activision Blizzard (NASDAQ: ATVI) has posted its Q4 2022 earnings report, which topped consensus estimates despite a broader quarterly drag for game makers. On Monday, February 6th, the prominent video game publisher reported a commendable performance for the last three months of 2022.
For Q4 2022, Activision saw net bookings of $3.57 billion, compared to the $3.08 billion analysts expected for the quarter. In addition, the Santa Monica-based company realized adjusted earnings per share (EPS) of $1.87 for the quarter versus the $1.52 expected. Activision also reported its Q4 2022 monthly active users (MAUs) as 389 million. Analysts were expecting a slightly smaller MAU user base of 388.4 million for the same period.
Furthermore, Activision generated $1.12 billion in operating cash flow for the fourth quarter compared with the $661 million it made a year ago. Expectations were exceptionally high for the American video game developer coming into this earnings cycle because Activision recently went through a series of high-profile gaming releases that saw tentpole titles hit stores. These releases included Call of Duty: Modern Warfare II, World of Warcraft: Dragonflight, and Overwatch 2.
“Modern Warfare,” arguably Activision’s most famous gaming title, sent the company’s figures soaring ten days after its 2022 release. Released in late October last year, the first-person shooter game generated $1 billion in sales for Activision despite a downturn in consumer spending.
Commenting on Activision’s recent quarterly performance, company CEO Bobby Kotick said:
“We ended 2022 with record quarterly net bookings as we delivered on our mission to bring epic joy to players. I’m grateful to our talented and hardworking teams for their many successes entertaining our hundreds of millions of players around the world.”
Kotick also touched on the company’s looming controversial deal with Microsoft (NASDAQ: MSFT), touting expected breakthroughs. According to the Activision chief executive:
“We look forward to a historic year as we work toward merging with Microsoft. This merger will enable us to better serve our players, create greater opportunities for our employees, and allow us to succeed in an increasingly competitive global gaming industry.”
Following the reported fourth-quarter performance, Activision shares increased by approximately 1% in after-hours trade.
The Microsoft-Activision acquisition deal is scheduled to conclude by the end of June 30th this year, pending regulatory approval. Although both parties continue to engage presiding regulators, the deal is yet to receive a green light. In fact, the Federal Trade Commission (FTC) is against Microsoft’s acquisition of the video game publishing giant. According to the FTC, such a purchase would give Microsoft an absolute advantage and an insurmountable edge over competitors.
The FTC argues that by owning Activision, Microsoft could have exclusive rights to vaunted games like “Call of Duty” and “Candy Crush.”
The Microsoft-Activision deal is valued at approximately $69 billion.
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