Joost Rietveld’s Post

Yesterday (July 18) was the final day under the merger agreement between Microsoft and Activision. The merger hasn’t consummated, so what happens next? Today, it was announced that the parties agreed to an extension of the merger agreement until October 18. As part of the revised agreement, Microsoft has increased the termination fee payable to Activision (in the off-chance the merger isn’t finalized before the new termination date) to $4.5 billion. The article linked below further states that Activision 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. The merger has now been cleared in 40 countries with the UK being the only holdout left. On Monday, the Competition Appeal Tribunal in the UK agreed to adjourn under strict conditions the pending appeal trial between the Competition Markets Authority and Microsoft. Watching Monday’s hearing, it became clear that the judge set those conditions to avoid any gamesmanship by the CMA. It also became clear that the CMA changed tack and is now a lot more cooperative towards Microsoft. By extending the merger agreement, Microsoft shows it is willing to engage with the regulator, find an acceptable solution to its concerns (without harming the intentions of the merger), and maintain a productive relationship with an eye on any future acquisitions. One of the remaining open questions is what Microsoft is proposing to the CMA that would be an acceptable remedy to clear the deal. In Monday’s hearing, it looked like all parties have a specific arrangement in mind where the whole of Activision is being acquired with the exception of certain assets. The lawyers referred to an older case between two two spirits makers where the target’s whisky’s assets were divested to allay competition concerns in the whisky market. This case looks to be a template where, perhaps, Activision’s cloud gaming rights are the equivalent of whisky and the relevant market is cloud gaming… Microsoft increasing the termination fee by a whopping $1.5 billion signals it is confident the deal will close. Investors appear to agree as the Activision share price hasn’t moved too much following this news. The CMA has set itself a new deadline for the updated investigation of August 29, so the deal might clear well before the new merger agreement is set to expire. #microsoft #activision #merger #acquisition #cma #cat #cloudgaming #videogames #corporatestrategy #whisky Microsoft Activision Blizzard Competition and Markets Authority UCL School of Management