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Activision-Blizzard Deal Racing to Friday the 13th Finish Line

MarketBeat - Wed Oct 11, 2023

Activision-Blizzard - Microsoft

Microsoft Corp. (NASDAQ: MSFT)is reportedly eyeing a Friday the 13th close for its acquisition of Activision Blizzard Inc. (NASDAQ: ATVI).

The companies announced the acquisition way back in January 2022, and Microsoft has run a gauntlet of regulatory scrutiny in the U.S. and the U.K. 

The acquisition, pegged at $68.7 billion, may take place as early as Friday, October 13. The deal will mean Activision's video games will be integrated into Microsoft’s Xbox Game Studios. The acquisition will substantially expand Microsoft's portfolio of games.

However, Activision has said that two of its most eagerly anticipated releases, Call of Duty: Modern Warfare III and Diablo IV, will not be included with the Xbox Game Pass in 2023.

Xbox Game Pass is a Microsoft subscription service that gives users access to a library of game titles for a monthly fee. It launched in 2017 for Xbox consoles and in 2019 for PC. 

Activision Blizzard Games Arriving on Game Pass in '24

Xbox Game Pass includes more than 250 games, with new titles added on a regular basis. Activision Blizzard games, including some of the company’s classic titles, are expected to start arriving on Xbox Game Pass in 2024. 

In an October 9 tweet from its corporate account on social media platform X, formerly Twitter, Activision said, “As we continue to work toward regulatory approval of the Microsoft deal, we’ve been getting some questions whether our upcoming and recently launched games will be available via Game Pass.”

While shareholders of both companies are cheering the launch of Activision titles on the Microsoft Xbox platform, as it will likely lead to rapid growth, there are still some regulatory hurdles to clear. 

The U.S. Federal Trade Commission’s effort to block the Microsoft-Activision deal was swatted down by a judge, leaving the U.K. as the only country yet to give the final stamp of approval. 

U.K. Regulator Expected to Give the Nod

In late September, the U.K.’s Competition and Markets Authority released a revised version of preliminary approval. 

The regulator had been a staunch opponent of the planned acquisition but, over the summer, extended the deadline for its review, allowing more time to peruse proposals submitted by Microsoft and Activision. 

The U.K. regulatory body initially had concerns that the merger could hinder the market for cloud gaming, but in response, Microsoft agreed to sell streaming rights to Activision Blizzard games to France gaming company Ubisoft. 

The Competition and Markets Authority is expected to give its final blessing any day now. 

In its most recent statement, the regulator said, “Microsoft has put forward remedies which the CMA has provisionally concluded should address these issues.” 

Do Investors Believe Deal Will Close?

As for how the market is approaching the impending deal, take a look at MarketBeat’s Activision chart.  The stock has gapped up multiple times since the deal was announced in early 2022, but never approached Microsoft’s $95 acquisition price until recently. That’s a sign that the market is growing more convinced that the deal will finally go through. 

When it’s announced that a stock is to be acquired, its price typically surges, reflecting the acquisition premium offered by the acquiring company. At that point, the stock is no longer buyable, as there’s no more upside for investors, other than what they capture in the gap higher on the acquisition announcement. 

As the acquisition process unfolds, the stock generally stabilizes, hovering close to the offered acquisition price. You’ll see a stock trade in a tight sideways pattern, as there’s essentially no buying or selling.

Investors closely monitor the deal's progress, regulatory approvals, and potential competing offers. If the deal faces hurdles or potential counterbids, the stock might experience heightened volatility, which is what happened with Activision. Investors were clearly skeptical that the deal would actually go through, given the challenges from U.S. and U.K. regulators. 

If the deal does go through on October 13, Activision will cease trading.

The article "Activision-Blizzard Deal Racing to Friday the 13th Finish Line" first appeared on MarketBeat.

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