Microsoft's Takeover Of Activision Blizzard Blown Off Course By CMA

The UK’s Competition and Markets Authority (CMA) is opposing Microsoft‘s planned takeover of games developer Activision Blizzard.
The CMA has provisionally concluded it would result in higher prices, fewer choices and less innovation.
The $69bn (£57bn) deal would see Microsoft acquire hit titles such as Call of Duty and World of Warcraft

Microsoft – Activision Blizzard Deal

There was already some pretty deep scepticism among shareholders about whether Microsoft Corp (NASDAQ:MSFT)’s takeover would be approved especially as multiple regulators were reviewing the transaction, given that Activision Blizzard Inc (NASDAQ:ATVI) shares were trading more than 20% below Microsoft’s offer of $95 a share.

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The deal would make a lot of sense for Microsoft given that Activision owns some of globe’s most valuable gaming intellectual property, including Call of Duty, World of Warcraft and Candy Crush.

Given the current popularity of gaming and how the industry is forecast to grow as e-sports balloon, it’s little surprise the tech giant wants an even bigger piece of the action and the ad revenue to match.

Outwardly Microsoft says it will find solutions to the CMA’s concerns that the takeover would result in higher prices, fewer choices and less innovation. But with the US Federal Trade Commission and European authorities also deciding on the takeover, Microsoft is likely to face an uphill battle against a regulatory steamroller which is still in first gear.

Arch console rival Sony on the other hand will be celebrating this latest blow to the merger. It’s been fighting the deal amidst concerns Microsoft will block access of blockbusters such as Call of Duty to its PlayStation platform.This comes in the wake of yesterday’s Q4 announcement by Activision which saw a sharp fall in profits.

However, it’s not all bad news for Activision shareholders. Activision's recent launches have helped to underpin a return to growth in user numbers. This, alongside record quarterly net bookings, gives some confidence that consensus forecasts of double-digit revenue growth in 2023 are achievable.”

Article by Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown