Microsoft Goes All-In On Video Games, Buying Activision for $68.7 Billion

Posted on: January 18, 2022, 10:49h. 

Last updated on: January 18, 2022, 02:38h.

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

Microsoft (NASDAQ:MSFT) is bolstering its status as one of the dominant names in the video game universe, announcing today it’s acquiring Activision Blizzard (NASDAQ:ATVI) for $68.7 billion in cash.

Activision
A scene from Call of Duty: Vanguard, seen above. Publisher Activision is being acquired by Microsoft for $68.7 billion. (Image: USA Today)

The deal values the Call of Duty publisher at $95 a share, or about 46 percent above where the stock closed on Jan. 14.

At this writing, California-based Activision is higher by 25 percent and trading around $82. There’s speculation in some circles antitrust issues could arise, and that could push Activision below the $95 a share offer price. But that hasn’t been confirmed.

In the largest deal in its 45-year history, Microsoft isn’t just acquiring the company behind iconic gaming franchises such as Call of Duty, Candy Crush, Diablo, Overwatch and Warcraft. The buyer is also purchasing a company wracked with controversy.

As recently as last June, Activision stock was flirting with $100. The following month, the state of California filed a sexual bias lawsuit against the video game publisher. A Wall Street Journal article indicated CEO Bobby Kotick was for years aware of mistreatment of female staffers, potentially including rape and sexual misconduct, but didn’t report those issues to the board. Amid the controversy, shares of Activision tumbled to around $56 in early December.

Kotick continue serving as head of Activision, and when the deal closes, the Activision Blizzard business will report to Microsoft Gaming CEO Phil Spencer, according to a statement issued by the companies.

Another Sign of Mobile Gaming Desirability

By acquiring Activision, Xbox maker Microsoft vaults to the third spot among video game companies in terms of sales, trailing only China’s Tencent and Playstation maker Sony.

The transaction is also the latest sign of gaming companies’ desire to get their hands on more mobile assets. Last week, Activision rival said it’s buying mobile games maker Zynga Inc. (NASDAQ:ZNGA) in an acquisition carrying an enterprise value of $12.7 billion. That deal is aimed squarely at bolstering the buyer’s mobile footprint — an objective Microsoft is accomplishing by purchasing Activision.

Mobile is the largest segment in gaming, with nearly 95 percent of all players globally enjoying games on mobile,” according to the Microsoft statement. “And with games like Candy Crush, Activision Blizzard´s mobile business represents a significant presence and opportunity for Microsoft in this fast-growing segment.”

The deal could also be a boon for Microsoft’s Game Pass portfolio, which recently reached 25 million subscribers. That figure could grow in significant fashion, because Activision has “nearly 400 million monthly active players in 190 countries and three billion-dollar franchises.”

Creating Gaming Goliath

When the acquisition closes in fiscal 2023, Microsoft will have 30 gaming studios, expanded publishing capabilities, and enhanced esports exposure, bolstering its status as a gaming behemoth.

Esports is also a fast-growing segment of the gaming arena. Its television viewership is or is close to encroaching upon the popularity of all domestic traditional sports, aside from the NFL, and it’s viewed as potentially fertile territory for expanded wagering options in the future.

Activision’s esports leagues include Overwatch League, the Call of Duty League, Hearthstone Grandmasters, and the World of Warcraft Arena World Championship, among others.