Microsoft Corp. plans to acquire Activision Blizzard Inc. in its largest deal yet as it looks to boost its gaming business and capture opportunities in the metaverse.
The technology behemoth said on Tuesday that it would buy the videogame publisher Activision for $95 per share in an all-cash deal valued at $68.7 billion. The per-share offer is 45 percent higher than Friday’s closing price of $65.39.
Microsoft will become the third largest gaming company in the world after Tencent Holdings Ltd. TCEHY, -5.13 percent 700, -2.75 percent and Sony Group Corp. SONY, -6.92 percent 6758, -0.04 percent. Microsoft already owns and operates Xbox, as well as “Minecraft.”
“Gaming is the most dynamic and interesting area in entertainment today across all platforms,” said Satya Nadella, CEO of Microsoft. “It will play a vital role in the development of metaverse platforms”. Companies are envisioning new virtual worlds in which people will connect. And the metaverse is a big issue in the technology business right now.
Microsoft plans to launch Activision Blizzard titles
The company’s GamePass streaming service has more than 25 million subscribers, and will add Activision Blizzard titles to it. Activision Blizzard produces popular video games such as “Call of Duty,” “Overwatch,” etc.
Bobby Kotick, the beleaguered CEO of Activision, will continue to lead Activision Blizzard and report to Microsoft Gaming Chief Executive Phil Spencer. Kotick has been chastised for how he handled sexual-assault complaints at the firm.
While regulatory approval and potential synergies between Activision and Xbox may raise concerns, Evercore ISI analyst Kirk Materne believes “the early read on this should be positive from an MSFT [Microsoft] point of view as this brings scale to MSFT’s gaming efforts and creates a ‘third leg’ to the growth story to complement Azure and [Office365].”
As of the announcement of the merger, Activision’s stock fell more than 37% from its 52-week high. Meanwhile, the S&P 500 index rose around 19% during the same period.
Martin Yang called the deal “one of the better outcomes for ATVI shareholders”
The purchase is “one of the better options for ATVI shareholders,” according to Oppenheimer analyst Martin Yang, in part because it “provides the possible cultural shift that ATVI expects”, he also projected that “among other huge tech platforms, large private gaming companies, and prominent AAA video game publishers,” the pace of large mergers will go up.
According to Dow Jones Market Data, shares of fellow publisher Electronic Arts Inc. EA, 3.48 percent are up 6.5 percent in Tuesday trading, on track for their highest single-day percentage increase since March 26, 2020, when they climbed 10.7 percent. In France, Take-Two Interactive Software Inc. TTWO, 1.09 percent is up 4.1 percent, while Ubisoft Entertainment SA UBI, +11.87 percent is up nearly 11 percent.
Take-Two Interactive Software Inc. ZNGA, -0.39 percent revealed intentions to buy mobile gaming company Zynga Inc. ZNGA, -0.39 percent for $12.7 billion last week, bringing the gaming industry to a halt.
Microsoft also cheered opportunities in mobile gaming
When touting its Activision acquisition, Microsoft also praised the prospects in mobile gaming. “Nearly 95 percent of all gamers globally games on mobile,” the company said in a statement, adding that Activision’s mobile business “represents a major footprint and opportunity for Microsoft in this fast-growing area.”
The purchase is expected to finalize in fiscal 2023 and be accretive to adjusted earnings per share, according to the business.
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