Amanda Silberling
Thu, April 28, 2022,
At a special meeting today, Activision Blizzard stockholders approved Microsoft's proposal to acquire the gaming company for $68.7 billion.
This all-cash transaction values the creator of games like Call of Duty, World of Warcraft and Candy Crush at $95 per share. But investors have worried that FTC chair Lina Khan could pull the plug on the deal due to antitrust concerns, which could explain why shares have been trading consistently lower than Microsoft's offer. Though today's vote is a meaningful step toward a successful deal for Activision Blizzard and Microsoft, the deal is still subject to regulatory review. The proposed transaction is expected to close before July 2023.
“Today’s overwhelmingly supportive vote by our stockholders confirms our shared belief that, combined with Microsoft, we will be even better positioned to create great value for our players," said Activision Blizzard CEO Bobby Kotick.
He added that the deal would provide "even greater opportunities for our employees, and to continue our focus on becoming an inspiring example of a welcoming, respectful and inclusive workplace,” which is a wild statement coming from someone who runs a company facing numerous lawsuits for sexual harassment, retaliation and discriminatory workplace practices. Kotick himself has been accused of knowing for years about sexual misconduct and rape allegations at his company but not doing anything about it.
In light of these conflicts, Kotick announced a zero-tolerance policy against harassment and $250 million investment in recruiting gender diverse talent (at the time, only 23% of employees identified as women or non-binary people). But employee dissatisfaction has prevailed.
When the acquisition was announced in January, quality assurance testers at Raven Software, a division of Activision, had been on strike for five weeks. They protested the layoffs of 12 contractors, which came after over a month of consistent overtime work.
"We realized in that moment that our day-to-day work and our crucial role in the games industry as QA was not being taken into consideration," Onah Rongstad, a QA tester at Raven Software, told TechCrunch at the time.
Raven Software concluded their strike by forming the historic first union at a major U.S. gaming company, but Activision Blizzard did not voluntarily recognize their union, which meant that they had to file for a union election with the National Labor Relations Board. The gaming giant tried to block the election, arguing that they couldn't unionize just one department of Raven Software, but the NLRB ruled in favor of the QA testers, giving them permission to vote for union recognition. That vote is expected to take place via mail between April 29 and May 20.
Given the turbulence at Activision Blizzard, Microsoft's acquisition offer seems like a lifeline. Kotick is expected to step down after the deal closes.
Microsoft to buy Activision Blizzard for $68.7 billion
NLRB rules Activision Blizzard’s first union at Raven Software can vote for recognition
Wall Street Is Betting That Microsoft-Activision Deal Will Fail
Brody Ford and Jason Schreier
Thu, April 28, 2022,
(Bloomberg) -- Activision Blizzard Inc. shareholders approved the company’s $69 billion sale to Microsoft Corp on Thursday, but Wall Street is betting that Biden antitrust enforcers could unravel one of the largest mergers in U.S. history.
Microsoft’s $95 offer is a 24% premium over Activision’s current share price, indicating investors see risk the buyout won’t close as planned. This risk premium is more than double that of Twitter Inc. following Elon Musk’s offer, and higher than most of the announced -- but still pending -- deals tracked by Bloomberg.
Tough-talk from President Joe Biden’s antitrust enforcers is fueling investor fears that the deal could be blocked or subject to delays even if it prevails, said Matt Perault of New Street Research. Plus, the deal will also need approval by other governments including the European Union and China.
The merger, which has until June 2023 to close, would make Microsoft the world’s No. 3 gaming company, and would give it ownership over two of the most recognizable gaming brands on the planet in Call of Duty and World of Warcraft. Microsoft would also gain control of Candy Crush developer King, which made $2.58 billion in revenue last year.
More than 98% of Activision shares voted in favor of the acquisition, the company said. The complete results of the meeting will be reported in a form 8-K to be filed with the U.S. Securities and Exchange Commission by early next week. The shares ticked slightly higher and closed at $76.70 in New York.
SOC Investment Group, an activist shareholder group with a small stake, earlier this month encouraged shareholders to vote down the deal. That group and other investors have spoken out against a potential golden parachute for embattled Activision Chief Executive Officer Bobby Kotick.
The deal will be reviewed by the Federal Trade Commission, which is led by Lina Khan, who has long advocated for a more forceful approach to reviewing deals, particularly by the biggest technology companies. Under her leadership, the agency has blocked Nvidia Corp.’s acquisition of Arm Ltd. as well as Lockheed Martin Corp.’s deal for Aerojet Rocketdyne Holdings Inc. She also resurrected the FTC’s monopoly case against Meta Platforms Inc., which seeks to split off WhatsApp and Instagram.
Fears of a legal challenge are well-founded, based on Khan’s statements opposing growth via acquisitions by big tech platforms, said Jennifer Rie, an antitrust analyst with Bloomberg Intelligence. Plus, it’s likely the FTC will have a Democratic majority by the time a decision has to be made, alleviating a stalemate that may have caused inaction on the Amazon-MGM merger, Rie said.
Not everyone is worried. Wedbush Securities analyst Michael Pachter places the odds of an FTC lawsuit at 10%, and chances of winning a case at 0% due to the difficulty in defining the concentrated market that this merger would cause. Microsoft wouldn’t have a massive share in the market for console games or videogames at-large, and current antitrust law overlooks so-called freemium business models common in gaming, Pachter said.
He attributes market fear to lack of familiarity with the video-game industry and the FTC’s tough-talk on mergers. The agency “can’t win this one -- so if they can’t win, they’re not going to sue. And Microsoft’s going to call their bluff.” Biden’s new antitrust chiefs have said they’re willing to take risks on big cases.
Even if an FTC challenge doesn’t ultimately prevail, a protracted legal fight could prompt the companies to abandon the deal, analysts said. Despite being the nation’s second-largest company, Microsoft has escaped much of the scrutiny lobbed at its peers. Its experience with regulators and proactive communications about the deal could make a difference in winning approval, said Betty Chan, a merger-arbitrage specialist at Elevation LLC.
“We are optimistic on the outcome at this point, but are still doing work to get more comfort on this.” Chan said.
(Updates shares. A previous version of this story was corrected to remove an erroneous amount of Kotick’s golden parachute.)
Most Read from Bloomberg Businessweek
Brody Ford and Jason Schreier
Thu, April 28, 2022,
(Bloomberg) -- Activision Blizzard Inc. shareholders approved the company’s $69 billion sale to Microsoft Corp on Thursday, but Wall Street is betting that Biden antitrust enforcers could unravel one of the largest mergers in U.S. history.
Microsoft’s $95 offer is a 24% premium over Activision’s current share price, indicating investors see risk the buyout won’t close as planned. This risk premium is more than double that of Twitter Inc. following Elon Musk’s offer, and higher than most of the announced -- but still pending -- deals tracked by Bloomberg.
Tough-talk from President Joe Biden’s antitrust enforcers is fueling investor fears that the deal could be blocked or subject to delays even if it prevails, said Matt Perault of New Street Research. Plus, the deal will also need approval by other governments including the European Union and China.
The merger, which has until June 2023 to close, would make Microsoft the world’s No. 3 gaming company, and would give it ownership over two of the most recognizable gaming brands on the planet in Call of Duty and World of Warcraft. Microsoft would also gain control of Candy Crush developer King, which made $2.58 billion in revenue last year.
More than 98% of Activision shares voted in favor of the acquisition, the company said. The complete results of the meeting will be reported in a form 8-K to be filed with the U.S. Securities and Exchange Commission by early next week. The shares ticked slightly higher and closed at $76.70 in New York.
SOC Investment Group, an activist shareholder group with a small stake, earlier this month encouraged shareholders to vote down the deal. That group and other investors have spoken out against a potential golden parachute for embattled Activision Chief Executive Officer Bobby Kotick.
The deal will be reviewed by the Federal Trade Commission, which is led by Lina Khan, who has long advocated for a more forceful approach to reviewing deals, particularly by the biggest technology companies. Under her leadership, the agency has blocked Nvidia Corp.’s acquisition of Arm Ltd. as well as Lockheed Martin Corp.’s deal for Aerojet Rocketdyne Holdings Inc. She also resurrected the FTC’s monopoly case against Meta Platforms Inc., which seeks to split off WhatsApp and Instagram.
Fears of a legal challenge are well-founded, based on Khan’s statements opposing growth via acquisitions by big tech platforms, said Jennifer Rie, an antitrust analyst with Bloomberg Intelligence. Plus, it’s likely the FTC will have a Democratic majority by the time a decision has to be made, alleviating a stalemate that may have caused inaction on the Amazon-MGM merger, Rie said.
Not everyone is worried. Wedbush Securities analyst Michael Pachter places the odds of an FTC lawsuit at 10%, and chances of winning a case at 0% due to the difficulty in defining the concentrated market that this merger would cause. Microsoft wouldn’t have a massive share in the market for console games or videogames at-large, and current antitrust law overlooks so-called freemium business models common in gaming, Pachter said.
He attributes market fear to lack of familiarity with the video-game industry and the FTC’s tough-talk on mergers. The agency “can’t win this one -- so if they can’t win, they’re not going to sue. And Microsoft’s going to call their bluff.” Biden’s new antitrust chiefs have said they’re willing to take risks on big cases.
Even if an FTC challenge doesn’t ultimately prevail, a protracted legal fight could prompt the companies to abandon the deal, analysts said. Despite being the nation’s second-largest company, Microsoft has escaped much of the scrutiny lobbed at its peers. Its experience with regulators and proactive communications about the deal could make a difference in winning approval, said Betty Chan, a merger-arbitrage specialist at Elevation LLC.
“We are optimistic on the outcome at this point, but are still doing work to get more comfort on this.” Chan said.
(Updates shares. A previous version of this story was corrected to remove an erroneous amount of Kotick’s golden parachute.)
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