A doomed deal?Microsoft’s proposed acquisition of Activision Blizzard has been in jeopardy for a while now, and it could be hindered further.
- Microsoft is likely about to be given a list of concerns by The European Commission regarding its $69bn bid to acquire video game holding company Activision Blizzard. The antitrust watchdog believes that the deal would significantly hinder competitors in the video game industry like Sony, Tencent and Nintendo.
- A final decision on whether the deal can proceed will be made by April 11 this year, despite the deal first being proposed in January last year. It’s not just Europe taking issue with the deal either, as the US Federal Trade Commission has in fact taken Microsoft to court in an attempt to block it.
- Activision Blizzard’s share price rocketed by almost 25% in the week the deal was announced in January 2022, and has since managed to maintain the majority of those gains. If the deal encounters further regulatory resistance however, its share price could soon be traveling down the charts – so keep your eyes peeled.
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A critical hitWhat would have been a major shift of power in the gaming industry might turn out to have been the deal that never was.
- Biden’s administration has moved to block Microsoft’s acquisition of Activision Blizzard. The $68.7bn deal, which was announced in January, would be the largest in the history of the video game industry, but the chances of it taking place are looking less likely than ever.
- Microsoft had attempted a charm offensive to prevent the deal from being blocked, announcing that the Call of Duty franchise would be made available on Nintendo consoles. However it seems it wasn't enough to sway the regulators, who are concerned the acquisition will overly disadvantage major competitors like Sony.
- The deal has not yet actually been blocked however, with a court hearing set for August 2023. President of Microsoft, Brad Smith, said Microsoft will contest the move to block. That being said, it might be a tough battle. Biden’s been taking a strong stance on anticompetition – with the FTC already blocking Penguin Random House from acquiring smaller publishing rival Simon & Schuster.
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The calm before the BlizzardThere’s a storm brewing over at Activision Blizzard, and it’s been whipped up by the Federal Trade Commission.
- Shares in video game titan Activision Blizzard were down by 4% on Friday, after it emerged that the Federal Trade Commission might be about to block Microsoft’s $69bn acquisition of the company on grounds of breaching antitrust laws.
- It’s believed that the lawsuit has been brewing for a while now, and could be filed as soon as next month. The governing body is taking issue with the fact that the acquisition could block competitors like Sony from selling flagship titles such as Call of Duty, which brings in billions in revenue.
- If the case was won against Microsoft, it would probably be bad news for ATVI shares. That being said, a ruling in Microsoft's favor would mean smooth sailing as they would still be prepared to purchase the company at a premium, so investors will be keeping a close eye on it.
Illustration by TradingView
Activision trickleCall of Duty maker Activision Blizzard sees its growth slow, but that doesn’t seem to bother investors who are eagerly awaiting its Microsoft merger.
- The game maker missed on both the top and bottom lines, reporting EPS of $0.64 on revenues that had declined by 28% YoY to come in at $1.77bn, as well as net income that fell nearly 50% to hit $393m.
- Demand is sputtering for Call of Duty, which is usually its most popular game, and the sales slowdown was the biggest reason for its dipping revenue – in fact, it may even be delaying the next game rollout in 2023. Other than that, Activision is also contending with a post-lockdown world, where there’s not as much time to play video games.
- Shares opened down a modest 1.5% before closing the day down 0.7%. Turns out investors are more focused on its near-$70bn Microsoft merger, which has got all its shareholder approvals and is set to go through early next year if all the regulators agree.
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Q4 loses the Battle RoyaleAll eyes are on Activision Blizzard amid its Microsoft (MSFT) deal, so there are a lot of people to see its stock go into Plunder Mode after holiday season earnings disappoint.
- It missed heavily on both ends with EPS of $1.25 on revenues that had dropped 18% to $2.49bn, sending its stock down 8% after hours.
- Call of Duty was MIA. The latest release from the franchise showed a lack of player engagement and “lower than expected performance”, sending console revenue down 31% for the quarter.
- It’s the first earnings since Microsoft’s record buyout announcement, and investors are aware now more than ever how badly Activision needs the deal to go through – it’s still dealing with last summer’s sexism allegations and facing calls for CEO Bobby Kotick to step down.
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Microsoft will acquire Activision BlizzardGaming giant Activision Blizzard (who's responsible for the relationship-testing Call of Duty craze) gets snapped up by Microsoft (MSFT) as the tech giant makes a play for the gaming industry, which is set to be a big driver of the Metaverse.
- The stock sped ahead over 25% to hit its highest price since July, regaining any “frat boy” culture accusation losses.
- Microsoft is buying it for a whopping $68.7bn (a 45% premium on Friday’s close), which will represent the biggest gaming industry deal in history. It’s a massive bet on the Metaverse from the tech giant, a gamble that’s proving popular atm.
- But, will the deal make it to the next level? Microsoft is already a giant, and the FTC and DOJ said only yesterday that they wanted to reassess big merger guidelines…
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