Microsoft pursues biggest purchase ever in Activision. Which videogame player could be next? (updated)
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Microsoft (MSFT
-1.8%) has a deal near $69 billion to take over Activision Blizzard (ATVI
+25.2%). That's a buyout with a number of superlatives: It's Microsoft's biggest ever by far, and the tech industry's biggest takeover. And it would make Microsoft the world's third-biggest gaming company by revenue - that is, if regulators permit it.

The combination of one of the broadest gaming portfolios in the industry with one of the leading hardware makers is sure to draw scrutiny not only at home but overseas - in Europe and China as well as the U.S. - and take perhaps a year to wrinkle out. A deal this size creates concerns both horizontally and vertically, Elevation analyst Betty Chan notes.
One item of concern is likely the near certainty that Microsoft will pursue making some games exclusive to its Xbox platform, a notable change as Activision's Call of Duty has an enormous player base on Sony's (SONY
-7.4%) PlayStation consoles.
"Itâs likely that they intend to stop offering ATVI games on PlayStation, which raises a host of antitrust concerns, so I expect that there will be some scrutiny and a likely consent decree requiring them to continue to support PS for a number of years in order to get the deal done," says analyst Michael Pachter.
Microsoft is saying that it will continue to develop for its rival's box, however. âIâll just say to players out there who are playing Activision Blizzard games on Sonyâs platform: Itâs not our intent to pull communities away from that platform and we remained committed to that,â Microsoft's Phil Spencer says.
With Activision Blizzard stock under heavy pressure of late, Microsoft saw its chance to move its consumer strategy forward, Wedbush's Daniel Ives notes. As for the regulatory concern, "MSFT is not under the same level of scrutiny as other tech stalwarts (Amazon (AMZN
-2.7%), Apple (AAPL
-1.9%), Facebook (FB
-3.8%), Google (GOOG
-2.3%, GOOGL
-2.3%)) and ultimately (Microsoft CEO Satya) Nadella saw a window to make a major bet on consumer while others are caught in the regulatory spotlight and could not go after an asset like this." (Ives has a $375 price target on MSFT.)
The deal if permitted will make Microsoft the world's third-biggest gaming company by revenue, behind only Tencent (TCEHY
-4.9%) and Sony (SONY
-7.4%). Microsoft had previously opened its wallet for ZeniMax and Bethesda Softworks, makers of the Fallout series, as well as for Mojang, makers of Minecraft.

Activision Blizzard has struggled over the past year under a cloud covering its employee relations and allegations of misconduct and harassment.
Its CEO, Bobby Kotick (under fire along with the company), will remain in charge until the deal closes, but he's now expected to step down after that. Microsoft's Spencer will have oversight of the combined operation. (Spencer told employees in November that Microsoft was re-evaluating its relationship with Activision in the wake of the allegations.)
The deal is also the biggest cash takeover of the COVID-19 pandemic era (Saudi Aramco paid $69 billion in cash for Sabic in 2019), suggesting more consolidation could be ahead for the sector - and indeed, the size of the deal means companies in the broader market aren't afraid to deploy cash opportunistically. And keeping in mind this month's other videogame multibillion-dollar megadeal - Take-Two's (TTWO
+2.1%) planned purchase of Zynga (ZNGA
+0.1%) - who might be next?
The market seems to like the odds of a takeout of French publisher Ubisoft (OTCPK:UBSFY). Shares have shot up 8.7% - though family ownership (it's held relatively close to the vest by the Guillemot family) could complicate a deal. If Activision Blizzard can be bought, though, it would make Electronic Arts (EA
+4.5%) the next likely target, and EA is also bucking the sharply lower market today.
CD Projekt (OTCPK:OTGLY), publisher of Cyberpunk 2077, is 3.4% higher in pink-sheet trading.
Roblox (NYSE:RBLX) was higher in the initial aftermath of the announced Microsoft-Activision deal, but it's now down 1.5%.
The deal puts pressure on Microsoft's biggest-tech rivals as well - not only Sony, but also Meta Platforms (FB
-3.8%), which has dabbled in its own gaming ambitions. One notable thing Microsoft gets with a purchase of Activision Blizzard is a now-thriving mobile business, a key focus for Meta and what looks like the new table stakes for gaming companies.
And despite declining in the initial aftermath of its deal, Take-Two (NASDAQ:TTWO) is 2.1% higher today, lending a bit of fuel to the chatter that its purchase of Zynga may have been an intermediate step toward its own takeover by a tech giant.

Updated 2:29 p.m. ET: How fast are things moving in videogame M&A? Activision Blizzard recently talked to a financial adviser about potentially topping Take-Two's $12.7 billion offer for Zynga, CNBC reports. With Microsoft talks surely ongoing for a while, that may have been meant as a backup in case its own sale plan fell apart.