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Activision Blizzard share price wobbles as Microsoft deal faces UK and US court battles

Activision Blizzard share price wobbles as Microsoft deal faces UK and US court battles


(Photo by Hakan Nural/Anadolu Agency via Getty Images)

Anadolu Agency via Getty Images Key Points Microsoft’s takeover of Activision faces regulatory hurdles from UK, US and even players in private lawsuit UK and US hearings set to take place this summer, with 40 more countries, including the EU, having already approved the Activisions merger share price has swung with the headwinds and now sits at $80 per share as Microsoft agreed to buy it for $95 per share

Big Tech had fun and now faces increasing regulatory scrutiny. That’s certainly the case with Microsoft’s proposed mega-merger with gaming company Activision Blizzard, which, at $75 billion, would be the biggest gaming takeover in history. So far, the UK and US have stood their ground with their claims, leaving Microsoft’s army of lawyers to battle it out in court over the summer.

The merger is delayed indefinitely and may even be canceled if it fails to convince the US and UK that the deal is competitive enough. Can Microsoft risk abandoning these two key markets to keep the deal intact? Let’s get into the details.

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What is the agreement offered by Microsoft and Activision?

In January 2022, Microsoft first announced that it would buy gaming company Activision Blizzard, which owns successful game franchises like Call of Duty, Candy Crush, and World of Warcraft, for a whopping sum. Microsoft is seeking to persuade regulators with certain concessions, such as offering 10-year licensing agreements for competing platforms – something Activision isn’t currently offering.

The merger would be the largest of its kind in history, with a hefty price tag of $75 billion. As a result, it attracted even more attention than any other merger – and not everyone liked what Microsoft was offering.

What is the problem between Microsoft and the UK?

In a bid to make an impact on the global post-Brexit regulatory scene, the UK decided to block the deal in April. The UK’s Competition and Markets Authority (CMA) argued that Microsoft had already cornered around 70% of the cloud gaming market, and that going after popular Activision franchises would give them too much power over the game. industry.

He even took the merger block one step further and said he would block Microsoft’s takeover of Activision for the next ten years. At the time, Microsoft chairman Brad Smith said the move discouraged technology innovation and investment in the UK and that the CMA had a poor understanding of that market.

In short, the CMA has taken a long-term view of the potential impact of mergers on the market. There’s a question mark over what would happen after those 10-year licensing deals expire for rivals – but again, it’s impossible to predict what the cloud gaming industry will look like in a decade. The UK is not taking any risks.

Naturally, Microsoft appealed the decision. The hearing is scheduled for July 24. Since then, there have been rumors that Activision may leave the UK altogether and move to Europe, where the deal has been greenlit, in a bid to resolve the issue.

How have other countries handled the merger proposal?

Another 40 countries have approved Microsoft’s proposed takeover of Activision. In May, the EU approved the deal, with the European Commission saying the deal was competitive because Microsoft planned to license Activision games to rival gaming platforms. The move was also seen as a blow to the UK’s decision as more companies seek to move away from the UK and establish European bases after Brexit.

China also approved the merger last week, with China’s State Administration for Market Regulation (SAMR) approving the deal unconditionally. Japan, home to gaming rival Sony, South Korea and Brazil are other notable markets that have approved the takeover.

Microsoft is probably furious with the CMAs’ decision, and to the rest of the world the UK looks like an outlier, but they’re not the only ones who have challenged the takeover. The US Federal Trade Commission (FTC) sued Microsoft last year to block the deal, arguing that Microsoft has a history of buying valuable games and only offering the content on its own platform. Xbox form. A hearing on the matter is scheduled for August 2.

In a David vs. Goliath situation, there is also a private antitrust lawsuit that has been filed against Microsoft by individual players, who claim the deal should be terminated because it significantly affects competition in the market. Microsoft said the players’ case contained unsubstantiated and implausible claims about the deal’s effect on competition.

The market’s reaction to the tragedy

Activisions shares have fallen and risen with the fallout of different regulators approving or rejecting the deal. When the EU approved the deal, its share price rose 1.3%, but fell 11% when the CMA decision was released. Overall, the stock is up 4.71% year-to-date to $80.5, well below the $95 per share Microsoft agreed to pay at the time of the announcement. of the purchase.

Microsoft hasn’t seen much effect on its stock price, buoyed this year by the AI ​​revolution and its early adoption of AI chatbots. For now, it benefits from a 40% increase in its share price in 2023 and hasn’t had much effect on the stock despite the uncertainty surrounding the merger.

That could change over the summer months once we hear more from the UK and the US about why it blocked the deal. If the merger does not go forward, Activision could see its share price plunge as the company’s future was entirely tied to the Microsoft takeover. Even if it does go ahead, it may not be in its current form, which could still send Activision shares plummeting and leave Microsoft with an overpriced asset.

The bottom line

Microsoft and Activision aren’t ready for an easy summer as they battle the CMA and FTC over whether or not the merger is anti-competitive. It will be popcorn-ready viewing for viewers and investors alike, who will be eager to see the outcome of just one country blocking such a valuable deal.

The risk is that the deal may not materialize at all, which could send the two companies’ share price skyrocketing and send a clear message to other Big Tech companies considering mega-mergers. The AMC has a long history of winning calls, so investors will be watching closely to see if anything changes.

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