Microsoft’s Activision was bought for $69 billion is facing heightened regulatory scrutiny — and some insiders at the game studio behind “Call of Duty” worry the Xbox maker could effectively scuttle the deal, The Post has learned.
The United States, Great Britain, and the European Union all have antitrust authorities reviews the proposed agreementMicrosoft will buy Activision for $95 per share.
Activision shares rose above $82 when the acquisition was announced in January, but have since fallen below $73 on Thursday, indicating growing investor skepticism about the deal.
Some insiders and analysts said Microsoft, which has had a better relationship with regulators in recent years than rivals such as Meta and Google, probably did not expect this level of scrutiny from authorities. Sources close to the situation said that despite Activision and Microsoft publicly putting on brave faces and insisting the deal would go through, the mounting pressure left the companies at odds behind the scenes.
At issue are antitrust regulators and Microsoft’s promises, or lack thereof, to offer gaming rivals such as PlayStation maker Sony.
Phil Spencer, CEO of Microsoft gaming company, has made it clear that the company plans to continue releasing Activision’s popular Call of Duty series on PlayStation, as well as bring it to other consoles such as the Nintendo Switch.
But Microsoft has refused to offer any legal remedies to EU regulators ahead of a full-scale investigation that could begin on November 8. This was reported by Reuters last week. Microsoft had the opportunity to offer so-called behavioral remedies to the EU as a formal pledge to keep Call of Duty on PlayStation, but declined to do so. The company may do so later during a full-scale investigation.
Activision insiders and analysts said Activision, led by Bobby Kotick, said Microsoft would prefer to take a more lenient stance with regulators now that the game maker’s shareholders would get paid regardless of whether Microsoft made concessions.
“If you’re Activision, you want Microsoft to offer everything for free forever,” a hedge fund analyst closely following the deal told The Post. “But it clearly destroys the economics of the deal.”
Some analysts and critics argue that keeping Activision’s games exclusively on Xbox is a big part of the deal for Microsoft, despite the company’s claims that Call of Duty will be available on PlayStation. While making a public guarantee is one thing, legally giving up exclusives could be a deal breaker, sources said.
“Microsoft’s decision to buy Activision is about exclusivity,” Wedbush Securities managing director Dan Ives told The Post. “If giving up exclusivity is one of the trade-offs required, Microsoft will have to think long and hard about whether this is still the right deal.”
“Microsoft is not buying this asset so other companies can use Activision games to the same extent,” Ives added. “It’s all about what the tradeoffs are.”
MoffettNathanson research analyst Clay Griffin similarly said: “Microsoft cannot be forced to accept tough terms.”
If the European Commission, the UK’s Competition and Markets Authority or the US Federal Trade Commission strike down the deal, Microsoft will have to pay Activision a $3 billion breakup fee – a relative pittance for the $1.7 trillion tech giant.
An Activision spokesperson told The Post, “We value our close working relationship with Microsoft. We are confident in the deal and its progress, and know that Microsoft is working diligently to make it happen. Any suggestion to the contrary is false.”
A Microsoft spokesperson told The Post, “Since the announcement of this acquisition, we have worked with urgency to demonstrate that we are serious about taking the necessary steps to win approval, including making proactive commitments about how we will” Centrally manage our work with gamers and developers. we will do. The process has progressed as expected and is still waiting for the deal to close on schedule.”
However, Microsoft is legally bound to use its “best efforts” to close the deal – and Activision could sue the Xbox maker if it believes the Satya Nadella-led company deliberately blew up the purchase.
While Activision’s latest “Call of Duty” is the best-selling game in the franchise’s history so far, Barron reportedthe collapse of the contract could still pose a financial threat to the company.
Before the Microsoft deal was announced in January, Activision shares were trading about 10% below their current price — and the company was struggling a bit. a large-scale sexual abuse scandal.
Meanwhile, Microsoft shares have lost more than 35% so far in 2022 amid rising inflation and interest rates, with the tech-heavy Nasdaq Composite Index down about the same amount.