Activision insiders worry $69 billion merger with Microsoft could fall apart: sources

Activision insiders worry $69 billion merger with Microsoft could fall apart: sources

Microsoft’s $69 billion takeover of Activision is under scrutiny from regulators – and some insiders at the game studio behind ‘Call of Duty’ fear the Xbox maker is actually doing blow up the deal, The Post has learned.

Antitrust authorities in the United States, United Kingdom and European Union are all reviewing the proposed deal, which would see Microsoft buy Activision for $95 per share.

Activision shares soared above $82 when the takeover was announced in January, but have since fallen below $73 on Thursday, indicating growing investor skepticism about the pending deal.

Some insiders and analysts said Microsoft — which has enjoyed better relations with regulators in recent years compared to rivals like Meta and Google — probably didn’t expect this level of scrutiny from authorities. The mounting pressure has left the companies at odds behind the scenes, sources familiar with the situation have said, even as Activision and Microsoft publicly make brave faces and insist the deal will be done.

At issue are the promises — or lack of promises — that Microsoft is offering to antitrust regulators and gaming rivals like PlayStation maker Sony, which has strongly opposed the deal.

Microsoft Gaming CEO Phil Spencer has publicly stated that the company plans to continue releasing Activision’s popular “Call of Duty” series on PlayStation, as well as potentially bringing it to other consoles such as Nintendo. Switch.

Microsoft’s $69 million takeover of Activision is under increased scrutiny from regulators.
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But Microsoft has refused to offer EU regulators legal remedies ahead of a full-scale investigation that could start on Nov. 8, Reuters reported last week. Microsoft had the option of offering the EU so-called behavioral remedies, such as a formal promise to keep “Call of Duty on PlayStation”, but refused to do so. The company could still do this later in a full-scale investigation.

Activision, led by Bobby Kotick, would prefer that Microsoft now take a more dovish stance with regulators because the game maker’s shareholders will be paid whether or not Microsoft makes any concessions, Activision insiders and analysts have said.

“If you’re Activision, you want Microsoft to give everything free forever,” a hedge fund analyst closely following the deal told The Post. “But that obviously destroys the economy of the deal.”

Bobby Kotick
Activision, led by Bobby Kotick, would prefer Microsoft to take a more dovish stance with regulators, sources said.
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Some analysts and critics say the option to keep Activision games exclusively on Xbox is a big part of the deal’s appeal for Microsoft, despite the company’s claims about keeping ‘Call of Duty’ available on PlayStation. . While giving public assurances is one thing, being legally bound to drop exclusives could be a deal breaker, sources said.

“Microsoft’s decision to buy Activision is about exclusivity,” Dan Ives, managing director of Wedbush Securities, told The Post. “If giving up exclusivity is one of the required concessions, Microsoft is going to have to think long and hard about whether it’s still the right deal.”

“Microsoft is not buying this asset so other companies can use Activision games to the same extent,” Ives added. “It all comes down to what concessions are.”

Players
“If you’re Activision, you want Microsoft to give everything free forever,” said a hedge fund analyst.
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MoffettNathanson research analyst Clay Griffin also said, “Microsoft cannot be forced to agree to draconian terms.”

If the European Commission, the UK Competition and Markets Authority or the US Federal Trade Commission cancel the deal, Microsoft will have to pay Activision a $3 billion severance fee – a relative drop for the tech giant of $1.7 trillion.

In a statement to The Post, an Activision spokesperson said, “We very much value our close working relationship with Microsoft. We are confident in the agreement and its progress, and we know that Microsoft is working diligently to make it happen. Any suggestion to the contrary is false.

In a statement to The Post, a Microsoft spokesperson said: “From the moment this acquisition was announced, we have worked urgently to show that we are serious about taking the necessary steps to obtain the approval – including making proactive commitments on how we’ll run our business with players and developers at the center. The process has progressed as planned and we still expect the deal to be completed on schedule.”

Still, Microsoft is legally obligated to do its best to get the deal done — and Activision could sue the Xbox maker if it believes the Satya Nadella-led company deliberately blew up the takeover.

Satya Nadella
Activision could sue Satya Nadella-led Microsoft if it believes the company blew up the deal.
Bloomberg via Getty Images

While Activision’s newest “Call of Duty” has so far been the best-selling game in franchise history, Barron reported, the collapse of the deal could still pose a financial threat to the company.

Activision shares were trading around 10% below their current price before the Microsoft deal was announced in January – and the company was reeling from a massive alleged sexual misconduct scandal.

Meanwhile, Microsoft shares have fallen more than 35% so far in 2022 amid soaring inflation and interest rates, while the tech-heavy Nasdaq Composite Index has also dropped by about the same amount.

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