Activision Blizzard has announced an extension to the deadline for its $69 billion takeover by Microsoft, now set for October 18. The extension comes as the two companies work towards obtaining approval from the United Kingdom’s antitrust authority. In addition to the deadline extension, the deal termination fee has been raised to $3.5 billion from $3 billion if the deal fails to close by August 29. This fee will further increase to $4.5 billion after September 15. Originally, the deal was expected to close on July 18, but regulatory obstacles in the United States and restructuring efforts in the UK have caused delays.
Regulatory Concerns in the US and UK
The United States Federal Trade Commission (FTC) made two unsuccessful attempts to temporarily halt the takeover. Their concerns included the possibility of Microsoft degrading the quality of Activision’s games or player experience on competing consoles such as Nintendo and Sony Group’s PlayStation. The FTC also raised concerns about potential pricing manipulation and changes to terms and access of Activision content. However, both a federal judge and an appeals court denied the FTC’s bid to block the deal.
The Competition and Markets Authority (CMA) in the UK initially decided to block the takeover but reversed its stance after the US court ruling, which left Britain as the sole opposer. The CMA has concerns about potential competition limitations in the cloud gaming industry, where users can play games on any device through subscription services like the Xbox Game Pass. To address these concerns, Microsoft has offered 10-year licensing deals to its rivals after the completion of the takeover. One such agreement was reached with Sony Group to ensure the availability of “Call of Duty” on PlayStation, Microsoft’s biggest competitor in the console market.
In response to the regulatory concerns, Activision Blizzard and Microsoft have been actively working towards securing the necessary approvals. The extended deadline provides them with additional time to address the issues raised by the antitrust authorities in both the US and the UK.
The decision to extend the deadline and increase the termination fee reflects the commitment of both companies to see the deal through, despite the challenges they have faced. Activision Blizzard’s “Call of Duty” franchise, one of the most successful in the gaming industry, holds significant value for Microsoft in its efforts to expand its presence in the gaming market.
While the completion of the takeover is still pending, both companies remain optimistic about the potential benefits the deal can bring. The extension of the deadline allows them to continue their negotiations and address the concerns raised by regulators. With the increased termination fee, the companies have further incentivized the timely completion of the deal.
The extension of the deadline for the Activision Blizzard takeover by Microsoft, along with the increased termination fee, demonstrates the determination of both companies to overcome the regulatory hurdles. The concerns raised by the US and UK antitrust authorities regarding competition, game quality, and player experience have prompted Microsoft to offer licensing deals to its rivals. The future of the deal remains uncertain, but the extension provides an opportunity for the companies to resolve the regulatory concerns and move closer to finalizing the takeover.
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