Microsoft's Activision Deal Approved in China, Appealed by FTC

- Microsoft's all-cash offer for Activision Blizzard was valued at $68.7 billion, or $95.00 per share, representing a 45% premium over Activision's stock price at the time of the announcement on January 18, 2022. The final transaction cost was reported as $75.4 billion. The deal was financed with cash on hand, without Microsoft needing to take on additional debt. - The primary strategic driver for Microsoft was to bolster its gaming division, particularly in mobile and cloud gaming, and to expand the content available on its Xbox Game Pass subscription service. The acquisition brought major franchises like "Call of Duty," "Warcraft," and "Candy Crush" under Microsoft's ownership, making it the world's third-largest gaming company by revenue, behind Tencent and Sony. - Investment banks Goldman Sachs and Simpson Thacher served as financial and legal advisors to Microsoft, respectively. Allen & Company and Skadden, Arps, Slate, Meagher & Flom advised Activision Blizzard. - The FTC's challenge to the merger centered on concerns that Microsoft could foreclose or degrade Activision's content for rivals in the high-performance console, multi-game subscription, and cloud gaming markets. The commission argued Microsoft would have an increased incentive to make popular titles like "Call of Duty" exclusive to its Xbox platform, thereby harming competitors like Sony's PlayStation. - To gain approval from the UK's Competition and Markets Authority (CMA), which had initially blocked the deal over cloud gaming concerns, Microsoft agreed to a significant concession. It restructured the deal to sell the cloud streaming rights for all current and new Activision Blizzard games for the next 15 years to French publisher Ubisoft Entertainment. - This divestiture to Ubisoft allows the French company to license Activision's games to other cloud gaming services and include them in its own Ubisoft+ subscription service, a move designed to maintain competition in the cloud gaming market. The CMA approved this restructured transaction, viewing it as a substantially different deal from the one it originally blocked. - While the European Commission approved the merger with behavioral remedies, specifically a 10-year licensing commitment for cloud gaming, the CMA initially rejected a similar offer. The CMA argued that its ability to monitor and enforce such a remedy would be limited and that a 10-year period was insufficient to preserve early competition in the nascent cloud gaming market. - Beyond China, the deal received regulatory approval from numerous other international bodies, including the European Union, Japan, South Africa, and South Korea, before closing on October 13, 2023.