Microsoft Acquisition of Activision on Brink Amid Regulatory Scrutiny

Posted on: November 7, 2022, 12:01h. 

Last updated on: November 9, 2022, 02:37h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Microsoft’s (NASDAQ:MSFT) planned $68.7 billion acquisition of video game publisher Activision Blizzard (NASDAQ:ATVI), which was announced in January, could be on the brink of collapse from intensifying antitrust scrutiny.

Activision
An ad for the new Call of Duty game. Microsoft’s bid to acquire publisher Activision could be in jeopardy. (Image: CallofDuty.com)

Unidentified sources close to the matter told the New York Post insiders at the Call of Duty publisher believe the takeover is in a precarious spot. That’s because the suitor wasn’t expecting the current level of regulatory perusal.

Regulators in the European Union (EU), UK, and the US are inspecting the deal, and there’s acrimony between the buyer and seller, as some at the video game company are pushing Microsoft to deal with the regulatory headwinds to bring the deal across the finish line, according to the Post.

In what would be the largest deal in its 45-year history, Microsoft is offering $95 a share to purchase Activision. While shares of the video game studio surged on the news, the stock never reached $95 and closed just below $72 last Friday, indicating increasing concern the engagement won’t become a marriage.

Microsoft/Activision Deal Has Casino Gaming Ties

Over this year, the Microsoft/Activision deal has been a source of controversy, though by no fault of either company, stirring up headlines with ties to the casino industry.

In an April 8-K filing with the Securities and Exchange Commission (SEC), Activision said it received a voluntary request for information from the commission and a grand jury subpoena from the Department of Justice (DOJ) with respect to possible insider options trades placed before the deal was announced.

IAC/InterActiveCorp (NASDAQ:IAC) Chairman Barry Diller, whose company is the largest non-fund investor in MGM Resorts International, is at the center of that probe.

While Diller wasn’t directly mentioned in the filing, he, stepson Alexander von Furstenberg, and entertainment mogul David Geffen are being investigated by the DOJ and the SEC.

The federal investigation caused some delays in Nevada regulators granting Diller a gaming permit in the state, but he was awarded a limited license in May. Diller, 80, and IAC CEO Joey Levin are both members of MGM’s board.

Call of Duty at Center of Deal Jeopardy

Activision is the company behind iconic gaming franchises, such as Call of Duty, Candy Crush, Diablo, Overwatch and Warcraft. Those are famous titles and cause for concern among regulators.

With Call of Duty as the prime example, regulators and Microsoft rival Sony are concerned the Activision suitor won’t release the popular war-themed game on Sony’s PlayStation. Microsoft manufactures Xbox, the competing console.

The Post reported Microsoft is promising to continue releasing Call of Duty on PlayStation and perhaps bring it to other video game platforms. But the technology company hasn’t provided regulators with a blueprint for how that will happen. The EU could launch a wide-ranging probe into the deal as soon as this week.