Microsoft – Activision Blizzard Takeover Blocked

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  •  CMA has blocked Microsoft’s takeover of Activision Blizzard, citing cloud gaming competition concerns
  • The $69bn (£57bn) deal would have seen Microsoft acquire hit titles such as Call of Duty and World of Warcraft
  • Microsoft has said it’s appealing the decision

Microsoft’s Acquisition Of Activision Blizzard Comes Under Pressure

Microsoft (NASDAQ:MSFT)’s long awaited strategic acquisition of game-maker Activision Blizzard (NASDAQ:ATVI) has come under pressure from authorities once again. The CMA has concerns that the deal could undermine fair competition in cloud gaming if the Xbox maker decides to make Activision’s games exclusive to its cloud gaming platform.

Cutting alternative distribution off at the knees is seen as a step too far for the UK authorities. Skepticism among shareholders about the proposed takeover was already rife, the CMA is not the only regulatory body to be sniffing around the deal.

Microsoft has plenty of financial resource to appeal the decision, with over $50bn of net cash languishing on the balance sheet.

There’s no guarantee that the CMA will bend on this one, but a compromise is possible. This could see Microsoft take on some areas of Activision and not others, but ultimately the final shape of the deal is hard to map.

Microsoft needs this deal to help stoke growth in the wake of disappointing personal computer sales, with the gaming market a far more high-growth area, which would supplement the group’s leading AI position.

Activision’s incredible haul of intellectual property is a big factor in this situation, but more broadly, as cloud gaming continues to grow and regulators learn as they go, tougher regulations and frustrating corporate outcomes are likely.

Article by Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown: