Microsoft and Activision Blizzard have announced an extension to their merger agreement as they continue negotiations with UK regulators. The original deadline for the deal has passed, but both parties now have until October 18th to finalize the transaction.
Lulu Cheng Meservey, Activision Blizzard’s Chief Communications Officer and Executive Vice President of Corporate Affairs, expressed confidence in the deal’s benefits, stating, “The recent decision in the US and approvals in 40 countries all validate that the deal is good for competition, players, and the future of gaming.” Meservey also noted that the companies believe there are remedies available to address the concerns of UK regulators, and as a result, they have authorized the continuation of the agreement.
As part of the extension, both Microsoft and Activision Blizzard have agreed to a higher termination fee and new commercial arrangements for the transaction. The termination fee, payable if either party chooses to walk away from the deal, has been set at $3.5 billion if the deal does not close by August 29th. If the deadline is further extended to September 15th without finalization, the termination fee increases to $4.5 billion.
Additionally, Activision Blizzard has agreed to potentially “hold separate the Company or certain assets of the Company or to implement other lawful alternatives to consummate the Merger” with UK regulators. This demonstrates the parties’ commitment to addressing any concerns raised during the regulatory process.
The delay in finalizing the deal is primarily due to Microsoft’s ongoing negotiations with the Competition and Markets Authority (CMA) in the UK. The CMA initially blocked the deal over concerns related to cloud gaming earlier this year. While Microsoft has appealed this decision, it is also reportedly considering selling off its rights to cloud gaming in the UK to address the CMA’s concerns.
A case management conference held on Monday allowed Microsoft and the CMA to negotiate a way to close the deal while also pausing the appeal process. The CMA indicated that Microsoft had not yet submitted its final proposal and set a deadline for Thursday at midday for the submission of all relevant evidence. Once this evidence is filed, the tribunal judges will officially implement the pause of the appeal.
Meanwhile, the CMA has announced that it will issue a final order by August 29th. Originally, Microsoft had planned to close the Activision Blizzard deal by July 18th, but the complexities of the regulatory process in the UK have extended the timeline. To prevent the deal from collapsing if Activision Blizzard were to walk away or in the unlikely event of another company offering better terms, Microsoft has chosen to extend the deadline.
Overall, the extension of the merger agreement gives Microsoft and Activision Blizzard more time to address the concerns of UK regulators and finalize the deal. Both parties are confident that the deal will ultimately be approved and believe in its positive impact on the gaming industry.
