In wake of FTC suit, analysts debate Activision/Microsoft fate - deal or no deal
Michael Buckner

Activision Blizzard (NASDAQ:ATVI) was fractionally down Friday, but on the way to its fourth straight lower session finish the day after the Federal Trade Commission said it is suing to block the publisher's acquisition by Microsoft (NASDAQ:MSFT).
That move has seen some skepticism from investors that the government can successfully block the deal, though the FTC is opposing one of the biggest tech takeovers of all time, a $69B acquisition.
And it's led to a spirited debate among analysts about what the opposition actually does to the chances of the deal.
Cowen's Doug Creutz says the move isn't surprising - and that the FTC's action (along with similar regulatory ramp-up in Europe and the United Kingdom) means "the chance of the deal closing is around 30%."
Oppenheimer says there's more of a chance the deal is blocked in one of those jurisdictions than allowed to go through, and focuses on Activision Blizzard's (ATVI) stand-alone value - which it sees at over $80 per share "with stronger content cadence and positive reactions to ATVI's existing and upcoming games, in addition to up to $4 per share breakup fee" - suggesting upside from here.
Wedbush's Michael Pachter agrees with the FTC's assessment that Microsoft limiting access to games would benefit Xbox, and harm Sony's PlayStation (NYSE:SONY) - but says nothing in the law or the FTC's comments so far suggests that "Microsoft should reconsider making its future Bethesda titles exclusive."
That said, Pachter notes the FTC has "showed its hand" to Microsoft (MSFT), and that the deal could be salvaged with a consent decree that looks to maintain the status quo: Microsoft can agree not to manipulate game pricing so long as games are available on other consoles; it can agree on equivalent game quality for all consoles; it can agree to maintain terms and timing of access (such as same-day release dates); and it can agree that it won't withhold content from other consoles altogether.
He expects now that the parties will file with an administrative law judge no later than January's end, with a decision by the end of February. It's possible that the UK's watchdog could balk, and call for a lengthy appeals process, but the company can agree to maintain status quo there as well, Pachter said. He still expects a closing by mid-April at the agreed $95 per share, and Activision is still a Best Idea at Wedbush.
Truist analyst Matthew Thornton has a Buy rating with an $81 price target, saying the key question now is timelines - the case could run up against the July 2023 deal deadline, which would always mean a renegotiation or potentially parting ways, he wrote. If the deal breaks, the focus turns to what Activision does with more than $13B in net cash: buybacks, mergers/acquisitions, or other?
Stifel also focuses on the stand-alone outcome, with analyst Drew Crum saying ATVI is still undervalued due to some expected record results in 2023 and a solid cash position.