U.K. issues preliminary approval for Microsoft-Activision merger
Rich Polk
The biggest tech acquisition in U.S. history is on its way to the finish line following several hurdles from regulators across the globe. Microsoft's (NASDAQ:MSFT) $69B purchase of Activision Blizzard (NASDAQ:ATVI) will transform the gaming player into a gaming behemoth, with the company behind Xbox becoming the new owner of popular gaming franchises like Call of Duty and World of Warcraft. Microsoft (MSFT) has gone to great lengths to address concerns about its new market position, committing to "helping bring more games to more people" and "creating more opportunities for gamers and game developers."
Backdrop: Getting the deal approved wasn't easy, and the regulatory road was a bumpy one after the transaction was first put forward in January 2022. Microsoft (MSFT) eventually scored approval in the EU, China, and other markets, but faced a prolonged fight with the Federal Trade Commission in the U.S. and the Competition and Markets Authority in the U.K. Following several court losses, the FTC's suit was eventually dropped, while Microsoft (MSFT) refiled for the merger across the pond with remedies that included the divesture of cloud rights related to PC and console games.
It looks like it might finally be enough. The U.K. said overnight that it now sees "reasonable grounds" for the merger and the restructured proposal "opens the door" to the deal being fully cleared after gathering third-party feedback. Shares of Activision Blizzard (ATVI) rose 2% to $94/share in premarket trading, approaching the $95 price that Microsoft (MSFT) had laid out when it unveiled the industry-rattling transaction nearly two years ago. SA analyst The Gaming Dividend recently wrote that ATVI was a buy whether the deal closes or not, but it looks like investors now have their answer.
"We are encouraged by this positive development in the CMAâs review process," said Brad Smith, Vice Chair and President of Microsoft (MSFT). "We presented solutions that we believe fully address the CMA's remaining concerns related to cloud game streaming, and we will continue to work toward earning approval to close prior to the October 18 deadline."
What's in it for Activision? "As I said when we announced the deal, this transaction will help us accelerate our ambitions for the future of gaming and enable us to better serve our players," Activision Blizzard (ATVI) CEO Bobby Kotick wrote in a new email to employees. "Microsoft recognizes the commitment to excellence and creative independence that has served us well for the last 30 years. I am confident that their resources, technology, and tools will provide us even greater opportunities to create even better games."
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