Microsoft, Activision extend $75B deal deadline to secure UK approval
Activision Blizzard and Microsoft have extended the deadline for their $75 billion deal by three months to October 18th. This decision comes as the American companies face the challenge of securing approval from UK regulators for what is set to be the largest gaming deal in history. The original deadline of July 18th had to be missed due to efforts by US regulators to block the takeover and the UK’s push for a restructuring of the deal. Microsoft President Brad Smith explained in a tweet that the extension will allow the companies ample time to work on resolving the final regulatory issues, and he expressed confidence in the deal’s prospects for approval.
As part of the amended deal, Microsoft will owe Activision a fee of $3.5 billion if the takeover fails to close by August 29th, and $4.5 billion after September 15th. Reuters reported earlier this week that Microsoft sought to extend the contract in order to prevent any other potential acquirers from wooing Activision or causing a change of heart. By acquiring Activision, Microsoft aims to enhance its gaming portfolio with popular titles such as “Call of Duty” and “Diablo,” enabling it to compete with industry giants Tencent and Sony.
This extension comes after the companies faced varying concerns from regulators in both the United States and the UK. The US Federal Trade Commission (FTC) expressed worries that the deal could lead Microsoft to degrade the quality of Activision’s games or manipulate pricing and terms to gain an advantage over rival consoles like Nintendo and Sony’s PlayStation. On the other hand, the UK’s Competition and Markets Authority (CMA) questioned whether the deal could restrict competition in the cloud gaming industry, where users play games on any device using subscription services like Xbox Game Pass. In response to these concerns, Microsoft has offered 10-year licensing deals to its rivals, including a recent agreement with Sony Group to keep “Call of Duty” on PlayStation.
Despite these regulatory challenges, Activision announced strong financial performance in the second quarter of this year, driven by the success of the Diablo franchise. CEO Bobby Kotick expressed confidence in delivering solid financial results for the full year. In early trading, Activision shares were slightly lower, while Microsoft’s stock remained relatively stable.
FAQs:
Q: Why did Activision and Microsoft extend the deadline for their deal?
A: The extension was necessary to allow the companies time to secure approval from UK regulators and resolve any outstanding regulatory issues.
Q: What is the amended deal’s impact on the financial aspect?
A: The fee owed by Microsoft to Activision has increased to $3.5 billion if the deal fails to close by August 29th and $4.5 billion after September 15th.
Q: How does this deal benefit Microsoft?
A: If the deal goes through, Microsoft will gain access to popular gaming titles like “Call of Duty” and “Diablo,” strengthening its position in the competitive gaming market.
Q: What were the concerns raised by regulators?
A: The US FTC was concerned about potential negative impacts on game quality and player experience on rival consoles, while the UK CMA questioned whether the deal could hinder competition in the cloud gaming industry.
Q: How did Microsoft address these concerns?
A: Microsoft has offered 10-year licensing deals to its rivals, including an agreement with Sony Group to ensure “Call of Duty” remains available on PlayStation, addressing concerns about competition and access to content.
Microsoft and Activision Extend Deadline for $75B Deal to Secure Approval in UK
In a groundbreaking move, Activision Blizzard and Microsoft have announced a three-month extension to the deadline for their $75 billion deal. The companies are working towards securing UK approval for what is set to be the largest gaming deal in history. The original cutoff date of July 18 was missed due to US regulatory obstacles and Britain’s insistence on restructuring the deal. Microsoft President Brad Smith expressed confidence in overcoming these challenges, stating in a tweet that the extension will provide ample time to resolve the final regulatory issues.
As part of the amended deal, the fee owed by Microsoft to Activision in case either side terminates the takeover has been increased. If the deal does not close by August 29, the fee will rise to $3.5 billion from $3 billion. After September 15, the fee will further increase to $4.5 billion. Reuters reported earlier this week that Microsoft sought the extension to ensure that Activision is not lured away by another potential buyer or has a change of heart.
The successful completion of this takeover will grant Microsoft greater firepower in the competitive videogame market. By acquiring Activision, Microsoft will gain control over popular gaming titles such as “Call of Duty” and “Diablo,” enabling it to compete more fiercely against industry giants Tencent and Sony. In fact, the strength of these titles was reflected in Activision’s positive financial performance during the second quarter, surpassing market estimates for net bookings and adjusted profit. CEO Bobby Kotick expressed optimism about delivering strong financial performance for the full year, crediting the successful revival of the Diablo franchise.
Despite this positive development, regulators in the UK and the United States have voiced concerns regarding the deal. The Federal Trade Commission (FTC) raised fears that Microsoft could potentially undermine the quality and player experience of Activision’s games on rival consoles like Nintendo and Sony’s PlayStation. Additionally, the FTC expressed concerns about possible price manipulation and alterations to access terms or timing of Activision’s content. On the other hand, the Competition and Markets Authority (CMA) questioned whether the deal could impede competition in the cloud gaming industry. Microsoft has responded to these concerns by offering 10-year licensing agreements to competitors once the deal is finalized. In fact, Microsoft recently reached an agreement with Sony Group to ensure that “Call of Duty” remains available on PlayStation, which serves as Microsoft’s biggest competitor.
As Activision Blizzard and Microsoft navigate these regulatory challenges, the deadline extension allows for in-depth discussions and resolution of the remaining issues. By addressing the concerns of regulators, the companies hope to secure UK approval and finalize the historic gaming deal.