CMA only blocker of Microsoft’s £52bn Activision deal after US regulator loses appeal
Telegraph reporters
Sat, July 15, 2023
Microsoft
The Competition and Markets Authority (CMA) is now the only global regulator blocking Microsoft’s $69bn (£52bn) takeover of Activision after the US antitrust watchdog lost a key court appeal.
A US appeals court denied the Federal Trade Commission’s attempt to block the Microsoft deal on Friday, clearing a path for the companies to close the largest gaming deal in history.
The ruling is a blow to the FTC and its chairman Lina Khan, who sought to block the merger over concerns that Microsoft would withhold Activision’s most popular games, including the Call of Duty franchise from rival consoles or services.
Microsoft won a legal appeal of the decision last week and the FTC’s failure to succeed in its own challenge now means the watchdog has few options to block it before next week’s July 18 deadline to complete the deal.
The CMA was the first global regulator to object to the Activision takeover and its blocking order is now the only remaining legal impediment.
The European Commission cleared the Microsoft deal in May after the tech giant agreed to offer Activision’s games on rival cloud streaming services for at least 10 years.
The British watchdog and the tech companies paused a legal battle over the ruling last week and have opened talks about how Microsoft could yet secure CMA approval, suggesting a compromise could be reached.
Xbox-maker Microsoft has offered to sell off the cloud-based market rights for games in the UK in a bid to get the deal over the line, Bloomberg reported.
Following the failure of the FTC’s appeal, Microsoft President Brad Smith said: “This brings us another step closer to the finish line in this marathon of global regulatory reviews.”
Shares in Activision climbed 4.4pc on the ruling and Microsoft rallied 1.5pc.
Microsoft has strong incentive to close the deal before the July 18 deadline to avoid paying a $3bn breakup fee to Activision.
The FTC declined to comment.
In a procedural move separate from this week’s developments, the CMA on Friday extended its deadline for issuing a legally final order on the deal until August 29.
Telegraph reporters
Sat, July 15, 2023
Microsoft
The Competition and Markets Authority (CMA) is now the only global regulator blocking Microsoft’s $69bn (£52bn) takeover of Activision after the US antitrust watchdog lost a key court appeal.
A US appeals court denied the Federal Trade Commission’s attempt to block the Microsoft deal on Friday, clearing a path for the companies to close the largest gaming deal in history.
The ruling is a blow to the FTC and its chairman Lina Khan, who sought to block the merger over concerns that Microsoft would withhold Activision’s most popular games, including the Call of Duty franchise from rival consoles or services.
Microsoft won a legal appeal of the decision last week and the FTC’s failure to succeed in its own challenge now means the watchdog has few options to block it before next week’s July 18 deadline to complete the deal.
The CMA was the first global regulator to object to the Activision takeover and its blocking order is now the only remaining legal impediment.
The European Commission cleared the Microsoft deal in May after the tech giant agreed to offer Activision’s games on rival cloud streaming services for at least 10 years.
The British watchdog and the tech companies paused a legal battle over the ruling last week and have opened talks about how Microsoft could yet secure CMA approval, suggesting a compromise could be reached.
Xbox-maker Microsoft has offered to sell off the cloud-based market rights for games in the UK in a bid to get the deal over the line, Bloomberg reported.
Following the failure of the FTC’s appeal, Microsoft President Brad Smith said: “This brings us another step closer to the finish line in this marathon of global regulatory reviews.”
Shares in Activision climbed 4.4pc on the ruling and Microsoft rallied 1.5pc.
Microsoft has strong incentive to close the deal before the July 18 deadline to avoid paying a $3bn breakup fee to Activision.
The FTC declined to comment.
In a procedural move separate from this week’s developments, the CMA on Friday extended its deadline for issuing a legally final order on the deal until August 29.
How Microsoft’s Activision Blizzard win could dramatically alter the gaming industry
Daniel Howley
·Technology Editor
Fri, July 14, 2023
Microsoft’s (MSFT) win against the Federal Trade Commission in its attempt to block its $69 billion purchase of “Call of Duty” maker Activision Blizzard (ATVI) could clear the way for the company to move forward with the largest deal in gaming history.
While the FTC is appealing US District Judge Jaqueline Scott Corley’s ruling to the Ninth Circuit Court, the momentum is increasingly moving in Microsoft’s favor. And if the acquisition moves forward, Microsoft could dramatically alter the landscape of the gaming industry, ranging from the home console market to mobile gaming and the still-nascent cloud gaming industry.
“I think it's very clear now that Microsoft, as a company, views gaming as a really important part of what the company does overall,” IDC research director of AR/VR and Gaming at IDC told Yahoo Finance.
“At a high level for Microsoft, getting a lot more content from Activision Blizzard…is a game changer.”
Microsoft Corporation (MSFT)
A new gaming giant
Activision Blizzard is the largest game publisher in North America. In addition to the hit “Call of Duty” franchise, the company also offers “World of Warcraft,” “Diablo,” and “Overwatch.” The firm, however, also owns mobile game publisher King, the company behind “Candy Crush.”
Adding those franchises to Microsoft’s existing first-party titles including “Halo” and “Forza” would catapult Microsoft past Nintendo (NTDOY) to make the company the second-largest home console maker by revenue behind Sony (SONY). It would also put Microsoft behind Tencent and Sony as the third-largest gaming company by global revenue.
More broadly, the deal would push Microsoft higher up the food chain in the global gaming industry as well.
Microsoft President Brad Smith addresses a media conference regarding Microsoft's acquisition of Activision Blizzard and the future of gaming in Brussels, on Feb. 21, 2023. (AP Photo/Virginia Mayo, File)
“Historically, Sony would have twice the market share of Microsoft at all times. And so now with this acquisition, on a revenue basis they're the same size,” explained NYU Stern School of Business professor Joost van Dreunen. “It’s a huge moment for the games industry.”
Daniel Howley
·Technology Editor
Fri, July 14, 2023
Microsoft’s (MSFT) win against the Federal Trade Commission in its attempt to block its $69 billion purchase of “Call of Duty” maker Activision Blizzard (ATVI) could clear the way for the company to move forward with the largest deal in gaming history.
While the FTC is appealing US District Judge Jaqueline Scott Corley’s ruling to the Ninth Circuit Court, the momentum is increasingly moving in Microsoft’s favor. And if the acquisition moves forward, Microsoft could dramatically alter the landscape of the gaming industry, ranging from the home console market to mobile gaming and the still-nascent cloud gaming industry.
“I think it's very clear now that Microsoft, as a company, views gaming as a really important part of what the company does overall,” IDC research director of AR/VR and Gaming at IDC told Yahoo Finance.
“At a high level for Microsoft, getting a lot more content from Activision Blizzard…is a game changer.”
Microsoft Corporation (MSFT)
A new gaming giant
Activision Blizzard is the largest game publisher in North America. In addition to the hit “Call of Duty” franchise, the company also offers “World of Warcraft,” “Diablo,” and “Overwatch.” The firm, however, also owns mobile game publisher King, the company behind “Candy Crush.”
Adding those franchises to Microsoft’s existing first-party titles including “Halo” and “Forza” would catapult Microsoft past Nintendo (NTDOY) to make the company the second-largest home console maker by revenue behind Sony (SONY). It would also put Microsoft behind Tencent and Sony as the third-largest gaming company by global revenue.
More broadly, the deal would push Microsoft higher up the food chain in the global gaming industry as well.
Microsoft President Brad Smith addresses a media conference regarding Microsoft's acquisition of Activision Blizzard and the future of gaming in Brussels, on Feb. 21, 2023. (AP Photo/Virginia Mayo, File)
“Historically, Sony would have twice the market share of Microsoft at all times. And so now with this acquisition, on a revenue basis they're the same size,” explained NYU Stern School of Business professor Joost van Dreunen. “It’s a huge moment for the games industry.”
A deeper push into mobile gaming
While much of the conversation surrounding Microsoft’s acquisition has focused on whether “Call of Duty” will continue to be available on Sony’s PlayStation services — Microsoft says it will for 10 years — a more overlooked aspect of the deal is the impact it will have on the mobile gaming space.
Mobile gaming has been one of the fastest-growing areas of the gaming industry, but Microsoft is largely left out of the conversation. With Activision Blizzard’s mobile gaming power, Microsoft will instantly become a major player in the space.
In March 2023, Activision Blizzard had 368 million monthly active users. Of that, 243 million fall under the company’s King business. In Q1 2023, Activision Blizzard reported consolidated net revenue of $2.4 billion. A whopping $956 million of that came from mobile.
“With a large trillion dollar company like Microsoft at the table, owning ‘Candy Crush’ as a franchise, ownership over ‘Call of Duty Mobile,’ the ‘Diablo’ franchise, all these major IPs, Microsoft is now in a position to play a more meaningful role in mobile that they haven't been able to obtain,” van Dreunen said.
It’s not just the addition of King that would make Microsoft a mobile gaming juggernaut, though. By adding Activision Blizzard’s library of titles to its Game Pass cloud gaming business, the company will become a mobile behemoth. Cloud gaming allows consumers with strong internet connections to stream games from the cloud to traditionally underpowered devices such as smartphones, smart TVs, and low-powered laptops
“Their vision is for Game Pass Ultimate, to be put on Azure, and the…Xbox Live games to be served up through either the Game Pass Ultimate subscription or probably some either reduced price tier or even a free tier in certain markets, which will be driven by advertising,” Ward explained.
By offering Game Pass Ultimate and King’s lineup on mobile devices, Microsoft will be able to reach gaming populations that either don’t have access to traditional consoles or can’t afford them.
Sony will be forced to adapt
A newly empowered Microsoft will also force Sony to adapt to market changes. The company is already working to bring more live services games, those that are constantly updated and played online, to market, and has been on a studio buying spree in recent years.
“I think they're going to need to ramp up, dramatically, their live service game catalog, either organically or through acquisition, so that they're prepared to deal with, potentiality, 10 years from now that the Activision Blizzard game catalog, including Call of Duty, may get increasingly skewed toward Xbox and Windows,” Ward said.
Sony will also need to push deeper into the cloud gaming space, something it currently offers but doesn’t emphasize nearly as much as Microsoft does with its own business.
“By redefining the boundaries of what the gaming ecosystem really is across different devices and technologies, Sony is now suddenly a much smaller player in a much bigger pool,” van Dreunen said. So they have to now become more innovative, they have to start thinking of alternative strategies on how to leverage their existing IP.”
As for Nintendo? The Mario maker has long been its own kind of gaming company. It relies largely on sales of its own franchises, and its Switch console, though a huge seller, can’t run high-powered games like “Call of Duty.” And while it could change that with its unannounced next-generation console, precedent would leave you to believe that the company is uninterested in hitting performance benchmarks.
For Microsoft and Sony, though, the Activision deal could just be the start of a new front in the battle for gaming dominance.
Daniel Howley is the tech editor at Yahoo Finance. He's been covering the tech industry since 2011. You can follow him on Twitter @DanielHowley.
Alexis Keenan
·Reporter
Sat, July 15, 2023
A federal appeals court denied the Federal Trade Commission’s request to temporarily stop Microsoft (MSFT) from closing its acquisition of video game maker Activision Blizzard (ATVI), removing one of the last hurdles to completing the $69 billion deal.
The decision made by a three-judge panel for the 9th Circuit Court of Appeals upholds a ruling by a California federal district court judge on Tuesday saying it would not stop the transaction from moving forward while a separate FTC antitrust challenge plays out in court.
The deal still has to gain approval of UK regulators. The agency, Competition and Markets Authority (CMA), on Tuesday paused its legal proceedings to block the acquisition in favor of renewed negotiations with Microsoft. Microsoft has agreed to pay Activision a $3 billion break up fee in the event the tie-up failed to close by that date.
"We appreciate the Ninth Circuit's swift response denying the FTC's motion to further delay the Activision deal," Microsoft president and vice-chair Brad Smith wrote on Twitter. "This brings us another step closer to the finish line in this marathon of global regulatory reviews."
Legal experts view the ruling as a win for Microsoft, even though the FTC's underlying lawsuit alleging the deal would harm competition remains pending.
They reason that Microsoft's costs to keep the deal afloat while awaiting the outcome of the FTC's lawsuit would reach a tipping point, given that the agency is under no deadline to resolve its case.
The FTC first filed a challenge to block the merger in December. Its lawsuit, brought in the agency’s in-house court, alleges that combining the two companies would suppress competition in three markets: gaming consoles, subscription content, and cloud-gaming.
The acquisition, if closed, would be the largest in Microsoft’s history and the largest in the gaming industry.
Microsoft, which owns gaming console Xbox, controlled 16% of the console market in 2021. Microsoft said in court documents that since 2021 its share of console sales rose to 21%, though it has remained in third place behind PlayStation (SONY) and Nintendo (NTDOY).
Key to the Microsoft-Activision deal is the "Call of Duty" video game franchise.. (AP Foto/Peter Morgan, File)
The key to tie up is Activision Blizzard's lucrative "Call of Duty" franchise. The game series earns Activision Blizzard billions each year, with the latest installment, 2022's "Call of Duty: Modern Warfare II," clearing $1 billion in sales in its first 10 days on the market.
Adding the Call of Duty and Activision's other game franchises to Microsoft’s existing first-party titles including “Halo” and “Forza” would catapult Microsoft past Nintendo (NTDOY) to make the company the second-largest home console maker by revenue behind Sony (SONY). It would also put Microsoft behind Tencent and Sony as the third-largest gaming company by global revenue.
Global regulators including those in the EU, Brazil, China, Japan, and South Korea have already approved the deal.
The UK's CMA has voiced concerns that the deal could make Microsoft so dominant in cloud gaming, that it could lead to “reduced innovation and less choice for UK gamers over the years to come."
To assuage regulators' concerns that Microsoft would abuse the deal to wall off its leading "Call of Duty" game from its rivals, the company has signed agreements with Switch console owner, Nintendo, and Nvidia promising to keep the game available on the competing platforms for at least 10 years.
The FTC did not immediately respond to Yahoo Finance's request for comment on the appellate court decision.
Microsoft-Activision deal could open 'the flood gates for more M&A' in tech: Analyst
Alexandra Garfinkle
·Senior Reporter
Fri, July 14, 2023
Microsoft (MSFT) this week cleared a massive hurdle in court in its efforts to acquire Activision Blizzard (ATVI) for a whopping $69 billion. If the deal gets done as anticipated, it could mean much more tech M&A, Jefferies senior analyst Brent Thill recently told Yahoo Finance Live (video above).
"We think it opens the floodgates for more M&A," Thill said. "There's no question that anyone who was looking at doing M&A was looking at Microsoft's transaction with Activision. They were looking at Broadcom-VMware, they were looking at Adobe-Figma, all these deals in a holding pattern. If we can get these deals closed, we think, ultimately, it's going to open up confidence to make the move forward."
The good news, he added, is that the deal, and the court win, might mean that "ultimately if it's good for the consumer, the government can't just block everything."
Tech M&A has stalled amid a difficult macroeconomic climate and heightened regulatory scrutiny, led in the US by Federal Trade Commission (FTC) chair Lina Khan. Though Microsoft's bid for "Call of Duty" maker Activision Blizzard was recently cleared by a judge, regulatory hurdles are still very much in place when it comes to Adobe's (ADBE) proposed $20 billion buyout of Figma. Meanwhile, Broadcom's (AVGO) $61 billion VMware (VMW) deal has been inching closer to completion, this month getting the OK from European regulators (though it is still under investigation by the FTC).
"M&A is a good cleansing process," said Thill. "We've gone through a huge cycle, where a lot of companies have gone public and a lot of companies that are operating would just be stronger together. So, I think this is a cleansing process we need to go through, and it helps to restore confidence back into tech, as well as for a lot of other names."
Deal-making possibilities remain across the tech space, said Thill.
"You look at infrastructure software, you look at cybersecurity," he said. "I think the new big one that we're starting to see is in AI. There are a lot of AI startups, and they'll never get scale on their own. They need big balance sheets, users, and data to get the scale."
But, he added, "there are multiple areas of the tech stack that will get consolidated, and many of these areas will benefit from M&A returning."
Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on Twitter at @agarfinks and on LinkedIn.
Alexandra Garfinkle
·Senior Reporter
Fri, July 14, 2023
Microsoft (MSFT) this week cleared a massive hurdle in court in its efforts to acquire Activision Blizzard (ATVI) for a whopping $69 billion. If the deal gets done as anticipated, it could mean much more tech M&A, Jefferies senior analyst Brent Thill recently told Yahoo Finance Live (video above).
"We think it opens the floodgates for more M&A," Thill said. "There's no question that anyone who was looking at doing M&A was looking at Microsoft's transaction with Activision. They were looking at Broadcom-VMware, they were looking at Adobe-Figma, all these deals in a holding pattern. If we can get these deals closed, we think, ultimately, it's going to open up confidence to make the move forward."
The good news, he added, is that the deal, and the court win, might mean that "ultimately if it's good for the consumer, the government can't just block everything."
Tech M&A has stalled amid a difficult macroeconomic climate and heightened regulatory scrutiny, led in the US by Federal Trade Commission (FTC) chair Lina Khan. Though Microsoft's bid for "Call of Duty" maker Activision Blizzard was recently cleared by a judge, regulatory hurdles are still very much in place when it comes to Adobe's (ADBE) proposed $20 billion buyout of Figma. Meanwhile, Broadcom's (AVGO) $61 billion VMware (VMW) deal has been inching closer to completion, this month getting the OK from European regulators (though it is still under investigation by the FTC).
"M&A is a good cleansing process," said Thill. "We've gone through a huge cycle, where a lot of companies have gone public and a lot of companies that are operating would just be stronger together. So, I think this is a cleansing process we need to go through, and it helps to restore confidence back into tech, as well as for a lot of other names."
Deal-making possibilities remain across the tech space, said Thill.
"You look at infrastructure software, you look at cybersecurity," he said. "I think the new big one that we're starting to see is in AI. There are a lot of AI startups, and they'll never get scale on their own. They need big balance sheets, users, and data to get the scale."
But, he added, "there are multiple areas of the tech stack that will get consolidated, and many of these areas will benefit from M&A returning."
Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on Twitter at @agarfinks and on LinkedIn.
Appeals court rejects the FTC’s last-ditch attempt to stop Microsoft from buying Activision
Microsoft and Activision Blizzard can close their merger as early as Saturday.
Kris Holt
·Contributing Reporter
Fri, July 14, 2023
Dado Ruvic / reuters
The Federal Trade Commission has been unsuccessful in its last-ditch effort to pump the brakes on Microsoft's $68.7 billion purchase of Activision Blizzard. The Ninth Circuit Court of Appeals declined to grant the agency an emergency stay of a ruling that allows the deal to proceed in the US, leaving a UK regulator as the major outstanding hurdle.
A temporary restraining order was put in place last month to prevent Microsoft and Activision from closing the acquisition until Judge Jacqueline Scott Corley ruled on the FTC's request for a preliminary injunction. When Corley rejected the FTC's injunction request this week, she ruled that the agency had until 11:59PM PT on July 14th to obtain an emergency stay from the appeals court. Since that didn't happen, Microsoft and Activision are now free to close the deal as early as Saturday.
"We appreciate the Ninth Circuit's swift response denying the FTC's motion to further delay the Activision deal," Microsoft president and vice-chair Brad Smith wrote on Twitter. "This brings us another step closer to the finish line in this marathon of global regulatory reviews."
In her injunction ruling, Corley determined the FTC didn't prove its claims that the merger would harm consumers. The FTC said on Wednesday it would appeal Corley's decision. On Thursday, it asked the district court that ruled on the preliminary injunction in the first place to block the merger pending the appeal. Hours later, Corley denied that motion.
Back in December, the FTC sued to block the deal on the grounds that it would harm competition. An administrative hearing is set for early August. The agency sought a preliminary injunction to prevent the companies from closing the merger until the antitrust trial takes place. However, the merger deadline is July 18th.
Microsoft and Activision Blizzard are evidently confident of closing the deal by their Tuesday deadline. Activision’s stock will be delisted from the Nasdaq-100 index before the stock market opens on Monday, so the companies may finally seal the deal around that time.
If they can't do so by the deadline, they'll have to renegotiate terms or agree to extend the timeline. Otherwise, Activision can choose to walk away with a $3 billion breakup fee from Microsoft in its pocket. That seems unlikely at this point, as both companies are eager to join forces.
Microsoft and Activision have yet to resolve issues with a UK regulator, which blocked the deal over cloud gaming concerns. Microsoft has appealed that decision, but the companies and the Competition and Markets Authority agreed to put their legal battle on hold. The Competition Appeal Tribunal (CAT), which hears appeals on CMA decisions, will decide on July 17th if that pause will take effect.
The CMA said Microsoft and Activision were welcome to restructure the deal but warned that move may trigger a fresh merger investigation. The regulator has extended its deadline for making a decision until the end of August so it has more time to review a "detailed and complex submission" from Microsoft. However, the CMA said it aimed to bring things to a conclusion as soon as possible. Reports have suggested Microsoft could sell some cloud gaming rights in the UK to get the deal over the line.
Microsoft and Activision Blizzard can close their merger as early as Saturday.
Kris Holt
·Contributing Reporter
Fri, July 14, 2023
Dado Ruvic / reuters
The Federal Trade Commission has been unsuccessful in its last-ditch effort to pump the brakes on Microsoft's $68.7 billion purchase of Activision Blizzard. The Ninth Circuit Court of Appeals declined to grant the agency an emergency stay of a ruling that allows the deal to proceed in the US, leaving a UK regulator as the major outstanding hurdle.
A temporary restraining order was put in place last month to prevent Microsoft and Activision from closing the acquisition until Judge Jacqueline Scott Corley ruled on the FTC's request for a preliminary injunction. When Corley rejected the FTC's injunction request this week, she ruled that the agency had until 11:59PM PT on July 14th to obtain an emergency stay from the appeals court. Since that didn't happen, Microsoft and Activision are now free to close the deal as early as Saturday.
"We appreciate the Ninth Circuit's swift response denying the FTC's motion to further delay the Activision deal," Microsoft president and vice-chair Brad Smith wrote on Twitter. "This brings us another step closer to the finish line in this marathon of global regulatory reviews."
In her injunction ruling, Corley determined the FTC didn't prove its claims that the merger would harm consumers. The FTC said on Wednesday it would appeal Corley's decision. On Thursday, it asked the district court that ruled on the preliminary injunction in the first place to block the merger pending the appeal. Hours later, Corley denied that motion.
Back in December, the FTC sued to block the deal on the grounds that it would harm competition. An administrative hearing is set for early August. The agency sought a preliminary injunction to prevent the companies from closing the merger until the antitrust trial takes place. However, the merger deadline is July 18th.
Microsoft and Activision Blizzard are evidently confident of closing the deal by their Tuesday deadline. Activision’s stock will be delisted from the Nasdaq-100 index before the stock market opens on Monday, so the companies may finally seal the deal around that time.
If they can't do so by the deadline, they'll have to renegotiate terms or agree to extend the timeline. Otherwise, Activision can choose to walk away with a $3 billion breakup fee from Microsoft in its pocket. That seems unlikely at this point, as both companies are eager to join forces.
Microsoft and Activision have yet to resolve issues with a UK regulator, which blocked the deal over cloud gaming concerns. Microsoft has appealed that decision, but the companies and the Competition and Markets Authority agreed to put their legal battle on hold. The Competition Appeal Tribunal (CAT), which hears appeals on CMA decisions, will decide on July 17th if that pause will take effect.
The CMA said Microsoft and Activision were welcome to restructure the deal but warned that move may trigger a fresh merger investigation. The regulator has extended its deadline for making a decision until the end of August so it has more time to review a "detailed and complex submission" from Microsoft. However, the CMA said it aimed to bring things to a conclusion as soon as possible. Reports have suggested Microsoft could sell some cloud gaming rights in the UK to get the deal over the line.
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