Microsoft's USD69 billion deal for Activision finally set for approval

(Alliance News) - It seems that Microsoft Corp's new takeover deal for Activision Blizzard Inc is set for UK approval, following a long-winded back and forth with the UK Competition & Markets Authority.

Edison Group's Dan Ridsdale commented: "Microsoft appears to be on the verge of achieving a significant victory with its USD69 billion acquisition of Activision Blizzard, in what would be a welcome turnaround and a reminder that the UK is an attractive place to do business."

Redmond, Washington-based technology firm Microsoft is planning to buy Activision, the Santa Monica, California-based gaming company behind Call of Duty, for USD68.7 billion.

The UK Competition & Markets Authority on Friday said the revised merger deal proposed by Microsoft for its takeover of Activision Blizzard "addresses previous concerns and opens the door to the deal being cleared".

After the UK competition watchdog blocked the acquisition in April, Microsoft had submitted a restructured transaction to the CMA in August.

The revised deal would see Activision's cloud gaming rights sold to an independent third party, Ubisoft Entertainment SA, before Microsoft completes the takeover.

"The CMA considers that the restructured deal makes important changes that substantially address the concerns it set out in relation to the original transaction earlier this year," the regulator said.

In particular, the CMA said the cloud gaming rights sale to Ubisoft would prevent "important content", such as the Call of Duty, Overwatch, and World of Warcraft video games, from coming under the control of Microsoft in relation to cloud gaming.

This is because the CMA originally found that Microsoft "already has a strong position" in cloud gaming services and could have used its control over Activision content to "stifle competition and reinforce this position".

The cloud gaming rights sale to Ubisoft would help maintain "open competition as the market for cloud gaming develops over the coming years", the CMA argued.

"This is more than a simple concession, but it's a sacrifice that will be necessary to get the acquisition over the line," said Russ Mould, investment director at AJ Bell.

Similarily, Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said the loss of the cloud gaming rights "is not an ideal concession for Microsoft to have to make, but is necessary collateral if the deal is to be waved through."

The CMA said that there remain some "limited residual concerns" on the new deal, but noted that Microsoft has put forward remedies in a bid to address these concerns. The CMA said it has opened a consultation on the remedies, to last until October 6, before making its final decision.

"This is a new and substantially different deal, which keeps the cloud distribution of these important games in the hands of a strong independent supplier, Ubisoft, rather than under the control of Microsoft," said Colin Raftery, senior director of mergers and phase 1 decision maker at the CMA.

"With additional protections to make sure that the deal is properly implemented, this will maintain the structure of the market, enabling open competition to continue to shape the development of cloud gaming in the years to come, and giving UK gamers the opportunity to access Activision's games in many different ways, including through cloud-based multigame subscription services."

CMA Chief Executive Officer Sarah Cardell commented: "The CMA's position has been consistent throughout - this merger could only go ahead if competition, innovation, and choice in cloud gaming was preserved.

"It would have been far better, though, if Microsoft had put forward this restructure during our original investigation. This case illustrates the costs, uncertainty and delay that parties can incur if a credible and effective remedy option exists but is not put on the table at the right time."

Mould pointed out that "there have clearly been frustrations behind closed doors as the boss of the CMA had a real dig at Microsoft in the announcement."

"That suggests the CMA can't wait to wash its hands of the matter," he added.

However, more positively, Victoria Scholar, head of Investment at interactive investor, said: "This is a major step forward towards getting the deal over the line."

She added that "The tone has certainly turned a lot more positive, a shift from back in April when Microsoft's president Brad Smith described the period as the tech giant's 'darkest days' of working with the UK."

Shares in Microsoft had closed down 0.4% to USD319.53 each in New York on Thursday, inching down a further 0.1% in after-hours trading.

By Sophie Rose, Alliance News reporter

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