Microsoft and Activision Blizzard’s merger has hit a bump in the road, with some remaining regulatory issues in the UK causing a delay in finalizing the deal. As a result, the companies have agreed to extend the merger agreement deadline from July 18th to October 18th, 2023. This three-month extension will allow them the necessary time to resolve the remaining concerns and ensure a smooth acquisition.
If the two parties had not agreed on the new terms and either side had walked away, Microsoft would have been required to pay a $3 billion breakup fee. However, as the termination fee escalates to $3.5 billion if the merger hasn’t closed by August 29th and $4.5 billion if it’s not completed by September 15th, there is a heightened sense of urgency to reach a resolution. It is important to note that the termination fee will only be paid if the acquisition does not close. Additionally, as part of the agreement, Activision will be allowed to give its shareholders a dividend of $0.99 per share.
Despite the delay, both Microsoft and Activision Blizzard remain optimistic about the merger and are committed to getting it across the finish line. Microsoft Gaming CEO Phil Spencer wrote in a note to employees, “While we can technically close in the United States due to recent legal developments, this extension gives us additional time to resolve the remaining regulatory concerns in the UK.”
The Competition and Markets Authority (CMA), the UK’s antitrust regulator, initially blocked the deal in April, citing concerns about its impact on the cloud gaming market. However, the European Union approved the merger based on the remedies provided by Microsoft’s deals with third-party cloud gaming platforms. In response, Microsoft appealed the CMA’s decision, and with just days remaining before the deadline, the CMA expressed willingness to review a modified merger proposal.
To resolve the regulator’s concerns amicably, the CMA, Microsoft, and Activision submitted a joint proposal to delay their litigation by two months. The appeals tribunal granted this request on Monday, giving the CMA an additional six weeks, until the end of August, to review Microsoft’s new proposal. All parties involved are aiming to reach a resolution as quickly as possible, preferably before the October 18th deadline.
One important date to watch is August 2nd when an evidentiary hearing is scheduled to start in the Federal Trade Commission’s administrative proceeding. The FTC had attempted to block the merger but was unsuccessful in obtaining an injunction to halt the deal. However, if the merger hasn’t closed by August 2nd and the FTC’s administrative trial begins, it could introduce further complexities for Microsoft and Activision.
In conclusion, while the merger between Microsoft and Activision Blizzard has faced some challenges, both companies remain committed to resolving the remaining regulatory concerns and completing the acquisition. With the extension of the merger agreement deadline and ongoing discussions with the CMA, they are optimistic about finalizing the deal and bringing more games to a wider audience.
