M&A: Microsoft and Activision Blizzard extend agreement to October

Microsoft and Activision Blizzard have extended the deadline for the completion of their (US) $75 billion merger agreement until mid-October due to UK regulatory concerns about its impact on the emerging cloud gaming market. The extension, until October 18, does not change the original all-cash purchase price of (US) $95 per share that Microsoft will pay for Activision, the developer of popular games like Call of Duty and Candy Crush Saga.

Termination penalty increased

However, the termination fee that Microsoft would pay Activision if the deal falls through after September 15 has been increased to as much as $4.5 billion.

Microsoft’s President, Brad Smith, expressed confidence in overcoming the regulatory issues raised in the UK and stated that the company will honor all commitments agreed upon with the European Commission and other regulators. The companies set an 18-month deadline when they announced the deal in January 2022 to allow for global regulatory clearances, and a recent court decision in the US failed to prevent the deal’s closure. Despite this, the UK’s Competition and Markets Authority (CMA) had expressed concerns in April that could potentially block the transaction.

Approvals recevied from regulators in 40 countries

Both Microsoft and Activision are optimistic about resolving the UK’s concerns and have received approvals from regulatory bodies in 40 countries. They believe the deal is beneficial for competition, players, and the future of gaming. The extension allows more time for the companies to address the CMA’s concerns and submit amendments if needed. Despite potential hurdles in the US, including a separate complaint from the Federal Trade Commission scheduled for an in-house court hearing starting on August 2, both companies are confident that the deal will ultimately close successfully.

The acquisition of Activision Blizzard by Microsoft is a significant move in the gaming industry and is being closely watched by regulators around the world. As cloud gaming continues to gain momentum, concerns about competition and market dynamics have been raised. The extended deadline provides Microsoft and Activision with an opportunity to address these concerns and work towards a successful merger that could reshape the gaming landscape. However, they will need to navigate regulatory scrutiny in multiple jurisdictions to ensure a smooth completion of the deal.

US deal will proceed

Earlier this month, a California judge granted Microsoft approval to proceed with its acquisition of Activision Blizzard, despite an ongoing antitrust case filed by the FTC. Judge Jacqueline Scott Corley denied the FTC’s request for a preliminary injunction after considering both parties’ arguments. She acknowledged the deal’s significance as the largest in tech history and emphasized the need for scrutiny. However, Judge Corley deemed Microsoft’s commitments to preserve Call of Duty on PlayStation for a decade, ensure parity with Xbox, expand the game to Nintendo Switch, and bring Activision’s content to cloud gaming services sufficient. Microsoft’s dedication to multi-platform availability aligns with the ruling, but the deal’s completion still depends on negotiations with the UK’s Competition and Markets Authority.

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