Microsoft and Activision Seek U.K. Approval, Extend $69 Billion Deal Deadline.
In response to regulatory challenges from both the United States and the United Kingdom, Microsoft and Activision Blizzard have mutually decided to postpone the deadline for their merger agreement. According to a statement released by Activision on Wednesday, the initial completion target set for July 18 will now be extended until October 18.
The $69 billion deal, expected to be finalized by mid-July, encountered resistance from authorities in both countries, leading the companies to seek additional time for securing approval and resolving any concerns raised during the regulatory review process.
By granting this extension, Microsoft and Activision Blizzard aim to address the requirements and pave the way for a successful and compliant merger.
In light of the potential risks associated with not meeting the original deal deadline, Microsoft and Activision Blizzard strategically decided to extend the closing date for their merger agreement
. By doing so, they have effectively granted themselves more time to address and resolve any concerns raised by regulators in the United States and the United Kingdom, thereby increasing the chances of completing the transaction.
Had Microsoft not extended the deadline, the company would have been obligated to pay a substantial breakup fee of $3 billion to Activision Blizzard. This provision was part of a new agreement between the two companies on July 18, which also included a progressive increase in the termination fee if the merger failed to receive approval by the extended deadline.
Specifically, if either party terminated the transaction on or before August 29, the breakup fee would have been raised to an even higher amount of $3.5 billion. Subsequently, if the parties called off the merger between August 30 and September 15, the potential termination fee would escalate to a substantial $4.5 billion.
By extending the deadline for the merger, Microsoft and Activision Blizzard aim to avoid these steep breakup fees while providing themselves with a more significant window of opportunity to address regulatory concerns and meet the necessary conditions for the successful completion of the merger.
This extension demonstrates their commitment to pursuing the deal and willingness to take the required steps to ensure compliance with regulatory requirements and achieve a favourable outcome.
The deal extension between Microsoft and Activision Blizzard comes from the U.K. Competition and Markets Authority (CMA) delaying its transaction review until August 29. By granting this extension, the two companies are providing themselves with ample time for the CMA’s appraisal process to conclude.
The CMA had initially blocked the merger in May, expressing concerns about potential anticompetitive effects in the emerging cloud gaming market. However, after the U.S. Federal Trade Commission’s attempt to halt the deal in court was unsuccessful, the U.K. regulator decided to stop all litigation.
Now, the CMA has signalled its willingness to negotiate with Microsoft, stating that it is open to considering any proposals from the tech giant that could restructure the deal to address the regulator’s concerns.
To meet its revised deadline of August 29, the CMA must initiate a new review of the deal, building upon its past analysis. Despite this potentially time-consuming process, the watchdog actively seeks to expedite the review.
When the European Union approved the merger, it required concessions from Microsoft, including granting royalty-free licenses to cloud gaming platforms to stream Activision games.
Microsoft offered similar remedies to the CMA but was rejected because the regulator deemed them challenging to enforce and insufficient to mitigate concerns about consolidating power in the cloud gaming industry.
As a result, Microsoft will need to present a fresh package of measures to assuage the CMA’s apprehensions, going beyond its previous proposals.
Global regulators have raised concerns about the deal’s impact, particularly regarding the distribution of popular games like Call of Duty.
Industry players, including Sony, have expressed worries that Microsoft might restrict Call of Duty from being available on the PlayStation platform or potentially reduce the game’s quality on competing platforms. These concerns have prompted regulators to scrutinize the merger closely to ensure fair competition and protect consumers in the gaming market.
