- Competition watchdog says revised deal addresses concerns
- Decision expected before deadline on 18 October 2023
- If approved the transaction would be the biggest in the gaming industry
The long running saga of Microsoft’s (MSFT:NASDAQ) $68.7 billion takeover of Call of Duty maker Activision Blizzard (ATVI:NYSE) looks set to go through after the UK’s competition watchdog said revised terms addressed its concerns.
The UK’s CMA (Capital and Markets Authority) blocked the deal in citing competition concerns and reduced choice for consumers.
On Friday the watchdog’s CEO Sarah Cardell said: ‘The CMA's position has been consistent throughout - this merger could only go ahead if competition, innovation, and choice in cloud gaming was preserved.’
HOW HAS THE DEAL CHANGED?
Under the revised offer Microsoft has agreed to transfer Activision’s cloud streaming rights to independent French video games maker Ubisoft Entertainment (UBI:EURONEXT) for 15 years.
How Microsoft hopes to get around UK’s Activision deal blocker
This means gamers will have more choice to access Activision’s games, including World of Warcraft, through cloud-based subscription services.
Shares in Ubisoft were trading 3.5% higher on Friday morning.
The CMA said the revised deal is ‘new and substantially different, 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.’
CEO Cardell added, ‘It would have been far better... if Microsoft had put forward this restructure during our original investigation.’
WHAT HAPPENS NEXT?
A consultation period will close on 6 October before a final decision is made later in the month before the deadline on 18 October.
The European Union approved the deal in May 2023 and the US competition watchdog had its bid to pause the deal rejected by an appeals court.
Despite initial objections from Sony that the deal could stop games being made available on the PlayStation, the Japanese competition regulator has approved the deal.
EXPERT VIEWS
Investment director at AJ Bell Russ Mould said: ‘The UK’s competition authority now suggests a solution has been found which could pave the way towards a green light on the deal.
‘This is more than a simple concession, but it’s a sacrifice that will be necessary to get the acquisition over the line.’
Claire Trachet, CEO and founder of consultancy Trachet, said today’s news is an optimistic sign from the CMA for UK mergers and acquisitions.
Trachet notes that CMA reviews or vetoes have led to ‘the abandonment of three times as many transactions when compared with rulings from the EU regulator from 2018 and 2020.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Martin Gamble) and the editor of the article (Steven Frazer) own shares in AJ Bell.
