Microsoft and Activision Blizzard Still Committed to $75 Billion Merger

Microsoft and Activision Blizzard plan to continue to work toward completing their $75 billion deal by sorting out lingering regulatory issues, people familiar with both companies said Tuesday.

The deal struck between the two companies early last year was set to expire at 11:59 p.m. Pacific time Tuesday, according to their merger agreement. It stipulates that Microsoft pay Activision a breakup fee of $3 billion if either party terminates the deal afterward. But neither company intends to do so, the people said.

Microsoft announced its plans to buy Activision in January 2022 and valued the deal at $69 billion after adjusting for the videogame publisher’s net cash. The companies secured regulatory approval in Europe, China and other markets but hit roadblocks in the U.S. and the U.K.

Activision shares have gained ground recently as investors bet that the deal is more likely to close. They ended trading Tuesday at $92.74, up 10% in July. The deal price is $95 a share.

Last week a U.S. federal judge denied the Federal Trade Commission’s bid to block the transaction while the agency appeals a July 11 decision by a trial court judge. The FTC more often drops its opposition to a deal if a judge denies an injunction, which is what happened with Meta Platforms’ acquisition of virtual-reality company Within Unlimited.  

Britain’s Competition and Markets Authority is now the only major obstacle to the deal closing. The regulator has said it is concerned that the merger could harm the nascent market for cloud gaming, or the streaming of videogames over the internet, though last week it agreed to consider a restructuring of the acquisition. The U.K. regulator added that it would need to conduct a fresh investigation into any changes made but didn’t say how long that would take.    

Activision is known for its hit videogame franchises such as Call of Duty, World of Warcraft and Candy Crush. Microsoft is looking to buy it to bolster its limited presence in mobile gaming, which is by far the biggest sector of the videogaming industry by revenue. The software giant also wants to pad its portfolio of titles for its videogame subscription service Game Pass, which includes cloud gaming.

Closing the Activision deal is critical for Microsoft to achieve those goals. Outside of China, there are only a handful of game companies with large portfolios that Microsoft could potentially acquire.

To woo regulators over the past 18 months, Microsoft made pacts with Nintendo, Nvidia and other rivals to make Call of Duty, one of the game industry’s most popular franchises, equally accessible to players on their platforms over a 10-year period. On Sunday, Sony Group,

If Microsoft can punch through the final barriers and finish the deal, the acquisition will give a boost to its videogaming business and mark a victory for its efforts to prevail over agencies that have become more stringent about how they review big tech deals.

Like other tech companies, Microsoft has been looking to rein in costs over the past year in response to a slowdown in pandemic-era growth. The company laid off more than 1,000 employees globally in recent weeks, with a concentration of staffers on its sales side. The move is consistent with Microsoft’s annual reallocation of resources across the company timed to the start of the fiscal year. These layoffs are separate from the earlier companywide layoffs that affected 10,000 employees.

Write to Sarah E. Needleman at [email protected]