Microsoft Closes $69 Billion Acquisition of Activision Blizzard

Microsoft (NASDAQ: MSFT) has successfully completed its $69 billion purchase of video game publisher Activision Blizzard (NASDAQ: ATVI), marking the tech giant's biggest acquisition in its nearly five decades of existence. The deal's closure, as revealed in a regulatory filing on Friday, followed approvals from regulatory authorities in the U.S., U.K., and Europe, who addressed and alleviated competitive concerns.

Earlier in the day, the U.K.’s Competition and Markets Authority endorsed the acquisition, paving the path for its finalization. Initially announced in January 2022, this acquisition furnishes Microsoft with an extensive collection of popular video game titles. Notable franchises like Call of Duty, Crash Bandicoot, Diablo, Overwatch, StarCraft, Tony Hawk Pro Skater, and Warcraft are now under Microsoft’s umbrella.

In its most recent fiscal year, Activision Blizzard boasted $7.5 billion in revenue, a sum that, while significant, pales in comparison to Microsoft's colossal $212 billion in sales.

According to a recent blog post, Microsoft Gaming CEO Phil Spencer announced the initiation of efforts to integrate popular Activision, Blizzard, and King titles into Game Pass and other platforms. Details on availability are expected in the upcoming months. Bobby Kotick, the current CEO of Activision Blizzard, is slated to retain his position until the year’s end.

Microsoft continues to diversify its revenue stream

The acquisition aligns with Microsoft CEO Satya Nadella’s strategy to broaden the company’s portfolio beyond its foundational products like operating systems and office tools. Nadella, who assumed leadership in 2014, views the partnership and competition with Activision, known for its blockbuster games, as a step towards this diversification.

Originally anticipated to conclude by June 2023, the acquisition encountered delays due to regulatory concerns. In July, both corporations agreed to push the completion deadline to October 18 after the Federal Trade Commission (FTC) in the U.S., the European Commission, and the U.K.’s Competition and Markets Authority voiced their reservations.

To address European regulatory concerns, Microsoft committed to providing free licenses for European Economic Area consumers to stream Activision Blizzard titles. Furthermore, agreements were inked with console competitors Nintendo and Sony (NYSE: SNE), ensuring decade-long access to popular games like Call of Duty. Cloud gaming providers, including Boosteroid, Nvidia (NASDAQ: NVDA), Nware, and Ubitus, received similar assurances.

Are regulators concerned with the acquisition of Activision Blizzard?

In the U.S., the FTC sought a preliminary injunction to halt the acquisition pending comprehensive approval but was overruled by a judge after extensive hearings. The appellate court upheld this decision, enabling the continuation of the acquisition process. 

Navigating the U.K. regulatory landscape proved intricate. Microsoft disclosed in August a contingency plan granting game publisher Ubisoft a 15-year access to cloud streaming rights for Activision’s titles, contingent upon the deal’s finalization.

The FTC said Friday it still has concerns. “We remain focused on the federal appeal process despite Microsoft and Activision closing their deal in advance of a scheduled December appeals court hearing,” FTC spokesperson Victoria Graham said. 

Graham added, “Microsoft and Activision’s new agreement with Ubisoft presents a whole new facet to the merger that will affect American consumers, which the FTC will assess as part of its ongoing administrative proceeding. The FTC continues to believe this deal is a threat to competition.”

Activision ended the second quarter with $587 million in net income on $2.2 billion in revenue, which was up 34% year over year.

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