Microsoft has reportedly agreed to take out gaming giant Activision Blizzard in a $68.7 billion all-cash deal, marking Microsoft’s costliest acquisition in history — and perhaps its most important in recent history. 💡
The proposed deal will see Microsoft pay $95/share, a 45% premium to the company’s stock price as it traded before the announcement. The acquisition comes after months of internal turmoil at Activision Blizzard. In July 2021, we highlighted troubles at Activision Blizzard and allegations that the company allowed/condoned “frat boy culture.” Some months later, in September 2021, we reported on Activision-Blizzard’s ongoing legal battles with state and federal regulators.
Weakness is not forgiving to companies, especially to media properties like A-B. Activision Blizzard was definitely weak — and ripe for takeout. However, there’s no guarantee this deal will close. 🙅
Microsoft has spent the last few years stacking up gaming properties to build the foundation of its industry-leading Xbox Game Pass. With Microsoft’s acquisition of Zenimax Media (the owner of Bethesda) last year, Xbox grew its game studio footprint to 23, putting Microsoft in a fundamentally different ballpark from its competitors. Microsoft’s commanding presence in the gaming industry makes it likely that this deal will be shot down by regulators. ❌
After all, Microsoft is the second-biggest company in the world… just hours before today’s deal ran off the presses, the U.S. Federal Trade Commission (FTC) and Department of Justice (DOJ) indicated their desire to rewrite merger rules to prevent large mergers (like this one.)
Naturally, investors aren’t fully convinced this deal will go through. 🤔 $ATVI rose 26% to $82.31 today, which is below Microsoft’s $95/share offering.
Another obvious issue is that (more progressive) countries are likely to doubt this acquisition even more than the U.S., since Activision Blizzard operates in dozens of countries. This international problem means the deal could take over a year to close, which is fair considering the consequences of such a large merger.
However, there’s a new game in town 😉 at Activision Blizzard. A number of the company’s employees continue to push for unionization… and for a purge of high-ranking execs who knew about the company’s problematic nature. That means AB will probably still need to start fresh once its CEO is inevitably kicked to the curb, dozens of employees leave, and the business has no choice but to reset.